In an interview with Eurogamer, well-known Capcom producer Yoshinori Ono said Capcom rejected a proposal for a Street Fighter character to appear in Mortal Kombat.
“It’s true that a proposal for a Street Fighter character in Mortal Kombat was rejected by Capcom. But it wasn’t me personally!,” said Ono.
Though Capcom has had collaborations with various companies, including, SNK, Marvel, Bandai Namco, Nintendo, nWay, and many others, people at the company thought the appearance of a Street Fighter in a Mortal Kombat game isn’t a good mix.
“There were many people at the company that felt that it wasn’t a good fit for our characters.”
He continued, “I actually met Ed at the Brazil game show and spoke to him personally about it. So it’s true – but I didn’t make the decision!”
Because MK is known for its gore and extreme violence, it seems like Capcom did not want to see its characters experiencing fatalities.
[Source]: Eurogamer: What does the future hold for Street Fighter 5?.