Substantial damages are caused to Nintendo and its licensees. It is irrelevant whether or not someone profits from the distribution of an emulator. The emulator promotes the play of illegal ROMS, NOT authentic games. Thus, not only does it not lead to more sales, it has the opposite effect and purpose. The emulator promotes nothing more than getting full use of a legally acquired product.
Emulators promote piracy.
That's like asking why doesn't Nintendo legitimize piracy. It doesn't make any business sense. It's that simple and not open to debate. Then you'd better leave the IDSA, as they claim to be looking to legitimize emulation to the benefit of ALL concerned, not just for Nintendo's own well-being. Nintendo pursues all aspects of on-line piracy, including emulators and ROMs.