Why don't most Protestants consider confession to be a sacrament? Most Protestants recognise only two sacraments, saying something like this (from the Anglican 39 Articles):


  There are two sacraments ordained of Christ our Lord in the Gospel,
  that is to say, Baptism, and the Supper of the Lord


But in the Gospels it is written:

John 20:21-23


  Again Jesus said, “Peace be with you! As the Father has sent me, I am
  sending you.” And with that he breathed on them and said, “Receive the
  Holy Spirit. If you forgive anyone’s sins, their sins are forgiven; if
  you do not forgive them, they are not forgiven.”


Mt 16,18-20


  And I tell you that you are Peter, and on this rock I will build my
  church, and the gates of Hades will not overcome it. I will give
  you the keys of the kingdom of heaven; whatever you bind on earth will
  be bound in heaven, and whatever you loose on earth will be
  loosed in heaven.”


Mt 18,18


  "Truly I say to you, whatever you bind on earth shall have been bound
  in heaven; and whatever you loose on earth shall have been loosed in
  heaven.


For who tells that was introduced by Pope Innocent III:

Acts 19,18


  Some believers, too, came forward to admit in detail how they had used
  spells 


John 1,1:9


  If we confess our sins, he is faithful and just and will forgive us
  our sins and purify us from all unrighteousness.


2 Corinthians 5,18


  All this is from God, who reconciled us to himself through Christ and
  gave us the ministry of reconciliation


Why isn't confession/penance considered a sacrament by most Protestants? Why don't they think these verses institute the sacrament of confession?
Prior to Christ, a priest was needed to help make sacrifice to receive forgiveness:


  Thus shall he do with the bull. As he did with the bull of the sin offering, so shall he do with this. And the priest shall make atonement for them, and they shall be forgiven. - Leviticus 4:20 ESV


The reason that Protestants don't consider confession a sacrament involving the need for a priest, is that Protestants believe that in Christ, we are a royal priesthood ourselves:


  But you are a chosen race, a royal priesthood, a holy nation, a people for his own possession, that you may proclaim the excellencies of him who called you out of darkness into his marvelous light. - 1 Peter 2:9 ESV. 


And


  9 And they sang a new song, saying, "Worthy are you to take the scroll and to open its seals, for you were slain, and by your blood you ransomed people for God from every tribe and language and people and nation, 
  10 and you have made them a kingdom and priests to our God, and they shall reign on the earth."  - Revelation 5:9-10 ESV


Of which Jesus is the great high priest:


  Therefore, holy brothers, you who share in a heavenly calling, consider Jesus, the apostle and high priest of our confession, - Hebrews 3:1 ESV


Protestants believe that there is only one mediator between man and God:


  For there is one God, and there is one mediator between God and men, the man Christ Jesus, - 1 Timothy 2:5 ESV


And


  and to Jesus, the mediator of a new covenant, and to the sprinkled blood that speaks a better word than the blood of Abel. - Hebrews 12:24 ESV


And that the apostles are brothers, with no special power or authority:


  12 What I mean is that each one of you says, "I follow Paul," or "I follow Apollos," or "I follow Cephas," or "I follow Christ."
  13 Is Christ divided? Was Paul crucified for you? Or were you baptized in the name of Paul?
  14 I thank God that I baptized none of you except Crispus and Gaius,
  15 so that no one may say that you were baptized in my name.
  16 (I did baptize also the household of Stephanas. Beyond that, I do not know whether I baptized anyone else.)
  17 For Christ did not send me to baptize but to preach the gospel, and not with words of eloquent wisdom, lest the cross of Christ be emptied of its power. - 1 Corinthians 1:12-17 ESV


As such, the Old Testament gives a specific process for confession involving priests, sacrifices and a temple/tabernacle/tent of meeting.  

But in Christ, Protestants believe that we are the temple in which God's Holy Spirit dwells (1 Cor 3:16), making us able to confess our sins directly to the Father.


  If we confess our sins, he is faithful and just to forgive us our sins and to cleanse us from all unrighteousness. - 1 John 1:9 ESV