There are people who are more likely to fly DL on those routes (or on other routes to gain status) if upgrades are available. Making upgrades available for those people would tend to increase revenues.

Most, perhaps all, of those people are unlikely to pay $1200 rather than $400 for a tcon round trip, so Delta isn't cannibalizing its own revenue by allowing upgrades. (Would you refrain from buying J if you had, say, about a 10% chance of a free upgrade?)