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Daly, a bricklayer, was arrested and charged in 2014 for the atrocity committed by the republican militant Real IRA splinter group.
The car bombing, which also injured around 220 people, was the single worst atrocity of the sectarian conflict known as The Troubles.
No-one has ever been convicted in a criminal court over the bombing, which tore through the market town of Omagh, testing the peace accords signed only months earlier to end three decades of strife.
In 2009, the Belfast High Court found that Daly and three other men were liable in a civil case brought by families of the victims and they were later ordered to pay more than £1.6 million (2.1 million euros/$2.2 million) in damages to the relatives.
Daly has always denied involvement in the bombing.
"It's very painful but on the evidence we've heard, I wouldn't want anyone to be convicted," Michael Gallagher, whose 21-year-old son Aiden was one of those killed in the bombing, told the BBC after the case collapsed.
"I feel that there has been a chance wasted here. There never was a political will to find the people responsible," he said.
"Justice as we know it is very, very difficult in Omagh," he said, adding that he was hoping for a public inquiry to find out the truth of what happened.
Acting on conflicting bomb warnings, police had moved shoppers and shop workers into a part of Omagh where a car packed with 500 pounds (225 kilogrammes) of explosives was parked, unwittingly putting them in close proximity to the huge blast.
A fireball swept from the epicentre of the explosion and shop fronts were blown back on to shoppers inside. The blast was so powerful that some of the victims' bodies were never found.
The Real IRA -- which sees itself as the successor to the Irish Republican Army paramilitaries -- claimed responsibility for the attack.
Around 3,500 people died in three decades of violence between Protestants favouring continued union with Britain, and Catholics seeking a unified Ireland.
The Omagh bombing was seen as a major test of the fragile peace established by the Good Friday agreements inked just four months earlier.
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