Mario Kart Arcade GP 2 has an unused feature that would have swapped Waluigi's model for Mario if he moved too far away from the camera.
The Mario Kart series is best-known for the console and handheld games in the franchise. Mario Kart games have consistently been the best-selling titles on each modern Nintendo system, with Mario Kart 8 Deluxe currently being the best-selling game on Nintendo Switch. There has also been a popular sub-series of Mario Kart games made for the arcades, developed by Bandai Namco. The most recent Mario Kart Arcade game added VR functionality, for those who want the thrill of seeing the Blue Shell pursuing them through the stage.
Mario Kart Arcade GP 2 had a cut feature that would have changed Waluigi in a strange way. According to Supper Mario Broth on Twitter, Mario Kart Arcade GP 2 has unused functionality that would change the character models to low-poly alternatives when they moved far away from the camera. In most cases, the characters had low-poly versions of themselves to use. The exception is Waluigi, who would have used Mario's model. This feature wasn't implemented in the final version of the game, so it wouldn't be seen during regular gameplay.
The use of low-poly models is still a regular occurrence in games. It's common for developers to reduce the number of assets used by characters that aren't near the player, in order to keep things running as smoothly as possible. This can also affect character animations, which is often seen in games where the player uses a sniper rifle on a foe that is far away.
Waluigi using Mario's low-poly model suggests that he was added late in development, and the producers decided to reuse assets while making the game. The original Mario Kart Arcade GP also has unused low-poly models, which suggest that they only existed during the testing phase. Waluigi hasn't received much respect over the past twenty years, but his lack of a low-poly model in Mario Kart GP Aracde 2 likely wasn't meant as a slight.