The short answer is that CPython didn't want to break compatibility with lots and lots and lots of Python modules implemented in C, so it was never viable to let PyPy seamlessly replace CPython.
I assume you might mean to ask "why wasn't PyPy adopted in some formal way into CPython" rather than a separate project, for which the answer is at least partially likely to be because it's a completely separate implementation.
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Why was PyPy abandoned and not embraced by Python? NIH?
The short answer is that CPython didn't want to break compatibility with lots and lots and lots of Python modules implemented in C, so it was never viable to let PyPy seamlessly replace CPython.
(PyPy was not abandoned.)
I assume you might mean to ask "why wasn't PyPy adopted in some formal way into CPython" rather than a separate project, for which the answer is at least partially likely to be because it's a completely separate implementation.