Sakurai Wanted Geno in “Super Smash Bros.”
At Least We Got Cloud
Speaking with Dream Nintendo (translated by Source Gaming, who has been the go-to source for finding about the behind scenes information on the "Super Smash Bros." series), game director Masahiro Sakurai discussed how certain stages and Mii costumes got into "Super Smash Bros." for Wii U/3DS. Of note, Geno was a particular character he wished was more an actual fighter than a costume for Miis.
To tell the truth, it’s because I wanted Geno to be a playable character. He has a gun for a hand, and I think he fits in really well with Smash. During Brawl, I thought it would be great if I could add him, but in the end it didn’t become a reality. Masahiro Sakurai
This could very well be due to the limited resources and amount of time given to the team or the fact that Square Enix wanted "Final Fantasy" representation foremost before diving into "Super Mario RPG," which would have to be further agreed upon by both Square and Nintendo.
If the interview is any indicator, Sakurai probably has Geno pretty high up on the list for the next line of characters that could get into the next "Super Smash Bros." Whatever the case may be, there's also the rumor that the 4th iteration of Smash could be ported to the tentatively titled Nintendo NX, where even more characters could be added. Cut characters like the Ice Climbers and more could see a return as well, seeing that the NX would be more powerful than the Nintendo 3DS and Wii U.
Source: Source Gaming