It's a "darker" reimagining of an existing character in a way that was, perhaps, designed to signal the attitude of Discovery compared to TOS (in the same way the character of Ellen Landry exists basically to signal to the viewer that Starfleet in DSC is gruffer and less cuddly than in TOS, and then to get gored).
The issue isn't that Mudd couldn't feasibly behave like that in-universe, but rather why the writers chose to revive the character in that way as a creative decision. To use DS9 as an example again, it's like how they write that Kirk's call for compassion in the Mirrorverse, and MirrorSpock's heeding of that call, resulted in total disaster. That could happen in-universe, but as a piece of writing, it can feel like the writers trying to broadcast "look, we're darker and more mature than the old stuff!", which will appeal to some viewers but annoy others.