Kane announced her decision at a news conference at her Harrisburg offices, but declined to take questions.
"It is important that my office perform its role in the system of checks and balances that our government desperately needs and that our citizens deserve," she said.
In a memo she sent Thursday to Corbett's Department of Revenue, which oversees the lottery, Kane's office revealed that it had asked Corbett to withdraw the contract because of a pending lawsuit filed by Democratic lawmakers and the union that represents lottery employees. Corbett refused.
Kane's office subsequently decided that state law does not allow the governor to privatize the operation or management of the lottery nor does it allow the expansion of gambling that the contract would permit.
Her office also concluded that the "indirect expenses" that Camelot can claim under the contract - essentially a management fee of up to 0.75 percent of the annual profit, or hundreds of millions of dollars over the life of the deal - are an unconstitutional waiver of the state's "sovereign immunity" protection against paying certain damages or claims.
Corbett and Camelot each later released statements saying they were disappointed. Corbett also reiterated that his motivation is to ensure that lottery profits keep pace with rising demand for programs for senior citizens that the lottery funds.