Cascarino believes it will be a difficult season for the England captain at the Tottenham Hotspur Stadium.
Kane was linked with a move away from North London and Manchester City were said to be his potential destination.
The English champions tried bringing in the 28-year-old but Daniel Levy was not ready to sanction the sale of his prized asset despite Manchester City’s willingness to defray the Londoners’ asking price.
Kane has not been at his brilliant best since the beginning of the season, having failed to net in each of his last four games in the Premier League.
“I think Daniel Levy has made a mistake – I think he should have let him go,” Cascarino said on the talkSPORT Breakfast.
“Harry Kane has played his last three games like his mind is scrambled.
“Crystal Palace away, he hardly got a kick, he then goes to Rennes and gets taken off, and then he played a really big game against Chelsea with his mind completely scrambled, for me.
“What is Harry Kane going to be like by Christmas if Tottenham are seventh or eighth in the Premier League? What is he going to be like in the second half of the season?
“I think he’s disillusioned already. I think it’s going to be difficult for him.
“You can play badly at any given time, but no to someone of Harry Kane’s standard. Is it a coincidence that over the last three games he’s been a bit of a non-event?
“Those last three performances have not resembled Harry in the slightest.”
