Let me correct myself on one thing. Geno is a playable character, but he is a Mario spin-off character who has had no further appearances of any meaning outside of that one game.
People remember Mario RPGs, including Paper Mario and Mario & Luigi, as Mario games. Geno gets no special exception there. He's a Mario character whose inclusion in anything is made more complicated by the fact that he's owned by Square Enix.
That last factor alone complicates him far more than KOS-MOS. While she is a Bandai Namco character, she has much closer and more relevant ties to a major Nintendo studio in the present day and her presence on Nintendo platforms has a wider and deeper history dating back to Xenosaga 1&2 on the DS.
I mean, if you played Super Mario RPG, there is an extremely good chance you remember Geno. Both Geno and KOS-MOS similarly share being among the most memorable characters and aspects from their respective titles. He gets a special "exception" in the sense that he has managed to literally retain a greater popularity as a Smash candidate than every other Mario RPG character (and is in general one of the most remembered spin-off characters ever).
I also don't see any "closer and more relevant to Nintendo" ties than literally existing in and being created for a major party member in Mario's first RPG title of all time. Outside of the more tenuous Monolith Soft connection (couldn't we argue the same thing in favor of Geno with how many Super Mario RPG devs have ended up working with Nintendo anyway? Especially with lead composer Yoko Shimomura playing a large role in Smash specifically), the one appearance in XC2, and the DS title that never released outside of Japan, all of her other crossover appearances have been directly decided upon by Bandai-Namco and largely with little relation to Nintendo and with a lot more appearances on other consoles in small roles. There's about as much history there as Cloud had when he got in (which isn't a bad thing, but I just don't see it as a compelling reason to specifically cite KOS-MOS as a choice, nor do I really see Geno's "history with Nintendo" as compelling either).
And don't tell me you're about to reiterate the tired talking point that Square Enix is some stingy studio that's hard to work with. Everything surrounding Hero that Sugiyama's shitty fingers aren't in was a resounding rebuttal of people's usual bitching about Square Enix. They were all in as full partners and they've already shown a willingness to give Geno out for Smash specifically in every capacity Sakurai has asked since they've been involved with the franchise (we never saw him taken as a serious candidate for Smash 4 and we shouldn't expect such a thing given Cloud was the natural and sensible priority). He's in no worse a situation than KOS-MOS at Bandai-Namco, there just has to be a willpower to make him (and her for that matter) playable.
Geno gets in due to Sakurai bias and fan demand, KOS-MOS gets in due to fan demand and Monolith Soft bias, I don't really see any reason to frame the situation any other way.
I think Sora would be pretty much the only character they could add that would legit make me even more disappointed in the fighter pass than the previous set of characters.
But he'd be a hype addition for the community at least!