"Holding kids back" is not the reason EdTech fails at scale.
The problem is that people who succeed in tech are able to effectively educate themselves, alone, without a dedicated human teacher supervising them or a group of student peers. (You need this skill to succeed in tech, learning new APIs/languages from written materials and online videos.)
The techies who build/fund EdTech wrongly assume that everyone could do this if only they had access to the learning materials, or if the tech vaguely simulated a teacher (an interactive textbook).
But for most students, fitting in with peers and earning the respect of their teacher is the only reason they're bothering to learn at all.
(For kids especially, adult career prospects feel so remote that it scarcely seems worth the trouble, whereas earning respect right now is a very, very concrete problem!)
Banding kids into grades is the only thing making most kids succeed. I guess that is a "crying shame," but it's a tragedy, not a policy failure.