The reason CO2, because it's easier to fill and the CO2 cartridges don't require the same pressure to fill. Keep in mind the CO2 is liquid under pressure, as soon as it is released into your tire, there is more volume than inside the cartridge, and it is also warmer, it changes from a liquid to a gas.

Air takes more space than liquid, so CO2 requires less space when it's a liquid in comparison to compressed air(N2/O2), although N2 and O2 can be liquid, but it requires immense pressure and cold temperatures.

With compressed air (N2/O2) it requires that you have a much higher pressure to fill the same amount of volume, which means that it would require a much more durable, and expensive cartridge. To whoever said they don't use it because of water reasons, is wrong. Compressors for paintball or scuba tanks can filter out water. Also fyi, CO2 in it's liquid state can be corrosive.