The deal meant £200,000 for each race would be ploughed into upkeep of the 85ha park, totalling £1m over the five-year term of the agreement.
But after a bruising campaign from a local action group the racing company, Formula E, agreed last month to pull out of the venue after this year's race in early July.
Battersea Park Action Group had threatened to go to court to challenge the council's right to rent the park out for the race.
But the action was withdrawn after the group reached agreement with Formula E not to use the park. Wandsworth Council was not involved in the talks.
A council spokesman said: "We were not party to the recent agreement between the protesters and Formula E. But we felt we had a strong case and would have been happy and keen to go to court.
"We wanted to establish our legal powers to stage events in Battersea Park. Unfortunately the case didn't make it to court, but we would have defended the case very robustly."
He pointed out a similar case last week, when Judges dismissed a High Court challenge from residents to stop Haringey Council allowing a music festival to go ahead in Finsbury Park.
The Wandsworth spokesman said: "This is the exactly the same argument the Battersea park campaigners were relying on."
He insisted all of the money would have been "ring-fenced" for Battersea Park and that damage from last year's inaugural race was little more than "one or two minor branches snapped".
He pointed out claims made by some protesters the park has been 'vandalised and desecrated' were completely groundless.
Of the £400,000 so far gained, for hosting the two races, cash had gone on general upkeep, planting and improving river walls.
"Park maintenance won't suffer without this extra income. But it but means we wont have as much money to do some of the bigger improvement schemes we might have hoped for."
He added: "It's a shame: we are at a moment in the history of local government when it is under the most financial pressure it has been for a whole generation. The races would have been good for the park and council tax payers."
A statement released by Wandsworth said: "Maximising income from external sources through the careful and considered use of the assets we manage helps keep council tax bills to a minimum, which is hugely important to hard pressed families, pensioners and others in our community on low and fixed incomes."