Toronto withdrew from their inaugural season in the Super League in July, with the ownership citing financial problems caused by the coronavirus pandemic, and expressed hope they could return next year under new ownership.
However, a meeting of the Super League board rejected Toronto's submission by a vote of 8-4, with one abstention.
"I was disappointed and there are two points to my disappointment. One, I was disappointed for the club and two I was disappointed for the game of rugby league," Carney told Sky Sports.
"I think we all lose out with this decision and in my opinion, the vote to deny Toronto into the Super League has sounded the death knell on professional rugby league in Toronto for the foreseeable future.
"On a broader sense it is disappointing for the game - we must remember that in a very short period of time we got this game that we love into the city of Toronto with upwards of 10,000 going to the games on a regular basis.
"This is not the first time this has happened - you speak to Celtic Crusader players who will give you the same story. We don't seem to learn our lessons. I have never seen a report on the Crusaders and what went wrong there and advice for the future franchises or future development clubs.
"It's not a totally surprising decision that they did not get in. I have been led to believe that the presentation was not what it needed to be and in fact it was well off in certain areas and was not enough to convince that clubs waiting to be convinced to vote yes."
Carney understands the importance of expansion for the sport of Rugby League but is not convinced that there is a master plan to make sure it is done properly. He also has concerns over Ottawa joining League 1 in 2021 and a team from New York following suit a year later.
"The game needs to press pause on expansion and do it properly. I think you get random applications to join the game and they are either accepted or rejected.
"Most of them are accepted and sadly most of them turn out to be failures. I don't think there are many winners with the Toronto situation, the whole game loses.
"My gripe with this was that you were asking 11 clubs with disparate interests and disparate levels of finances to vote on the future of the game in Toronto.
"In my opinion, it should not have come down to 11 clubs - I know the RFL got a vote but there should have been so many other bodies involved. International Rugby League should have been at the table and arguably the NRL should have been at the table too.
"I will make this point though; all of this should have been done at the very start. So I am not going to heap opprobrium on the 11 clubs for the decision they made because before Toronto were admitted, all the bodies that had an interest in this should have sat together and looked strategically at the North American market and made the decision to admit Toronto on that basis.
"So what seems to have been a somewhat shoddy admission process has meant that the chickens have come home to roost. It certainly muddies the waters when we know we have Ottawa coming in and we believe we have a submission from New York and yet we are expelling Toronto.
"In my eyes this puts doubts over Ottawa. If Ottawa get promoted up to Super League will they be accepted in? It is a very confusing situation at the moment."