I am experiencing the same issue
Hey team! We use passwordless email flow. A while back I had started a thread asking if there was a way to automatically create the user account and mimic the sign-in flow if an email doesn't exist. At the time, it sounded like that was in the works. I see the below entry on the "Done" column of the Kinde roadmap. I can't find much documentation on "Seamless sign up", but is that indeed the feature I'm looking for? If so, how do I enable it?
https://updates.kinde.com/board/seamless-sign-up