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When those measures are circumvented, Nintendo and third-party game developers suffer tremendous harm because, for example, individuals can then use the emulator to play pirated games.
Those pesky pirates are playing games available exclusively on the second-hand market on consoles we're not selling anymore!
Edit: Word order to make it less confusing.
Valve has made some incredible games and hardware, but it doesn’t mean they aren’t tricky bastards.
Does this count as being a “tricky bastard”? They saw something that looked questionably legal and their legal team wanted to cover their asses.
Also Nintendo is infamously litigious, I doubt even Valve wants to get into a legal battle with Nintendo. Even if Valve won, they'd still lose, and it's not like they'd be making any money distributing Dolphin. There's maybe some secondary sales by slightly increasing SteamDeck usage/sales, but that would in no way offset the legal costs.