No, it isnt. Companies dont go "LOL, HAVE MY CHARACTER. MAKE ME LOTS OF MONEY!" They care about what is done with their carácter since their property can be sullen if they just give free reign to the other company to do whatever they want.
That is why pikachu doesnt transform into super saiyan while speaking like a human being or why Sonic doesnt have different fur colors for smash. Giving someone the chance to use a character doesnt mean that there arent restrictions in place. When one makes a deal, there are stipulations put in place about what it is being done with character and what are the limits of such a deal.
Companies are usually careful about how much freedom they give. And if stuff like Zelda and Mario CD-i can prove, its that giving someone complete freedom over your IPs is a terrible idea.
Okay but yet here we go again with really bad counter examples. None of those examples have anything to do with how having Geno in Smash would protect their company image, etc, etc.
There's absolutely nothing for Square to gain other than a really I'm assuming small amount of cash considering he's a one off character who they've never used from Geno being in Smash Ultimate as an icon/spirit. They probably got more money off his Mii Costume than they would that.
And I'm sure we're all aware unless Cloud and Geno were both secured again back in the initial Smash 4 DLC phase for Ultimate, a whole other conversation about both their content coming back for Smash Ultimate had to have taken place. So in that event that makes twice Square said to Sakurai it'd be okay for him to use Geno in some capacity, but I'm going to assume it was only once.
Now here's my line of thinking. Geno is probably a relatively cheap character to license out because well he's not an icon, he's by all means really quite the underdog. He's not getting used, so he's not gonna cost Sakurai as much to use as say Cloud or Chocobo who have both been in Smash in some greater or equal capacity.
So here's the deal if a man comes to you and tells you there's a heap of fan demand for this one time character that you have been sitting on and you know he's not really worth that much to license out and you get paid this small amount of money for let's just say an icon. Let's just assume the only thing he has in Smash Ultimate is an icon and Spirit. Let's say you said yes to that.
Congratulations. You've gotten a minimal amount of profit. Now...let's flip it.
You see that fan demand and you probably also can gauge fan demand from sells of the Mii Fighter Outfit from Smash 4. You also know this is a character who you can make a playable character now and thus make even more money. Now Sakurai isn't paying you chump change. He's paying you a little more bang for your buck for a character that you just have sitting around collecting dust.
Congratulations. You've maximized your profits on a character you've not been profiting on prior to this.
Now tell me as a 46 year old company what would you more likely do?
Counter point to what I'm trying to say: It's certainly possible that seeing the fan demand and whatever the sales of the Mii Fighter costume from Smash 4 were like? Asked for TOO much money from Sakurai to turn Geno into a playable fighter in Smash Ultimate and thus he had to shoot them down but kept what he already had as bones for Geno's fans.