Among other things, Kane said lawyers on her staff had determined that the contract with Camelot, which runs Britain's national lottery, usurped the authority of the legislature to regulate and manage the Pennsylvania Lottery.
Friday's announcement marked the second extension on Camelot's bid since Kane, a Democrat, rejected the contract, a decision which struck at months of efforts by the Republican governor to seal the lottery deal.
The latest extension will give Corbett more time to decide whether to challenge Kane's ruling in court. He must make that determination by March 16.
The stakes are high. In the last fiscal year, the Pennsylvania Lottery recorded $3.5 billion in sales and sent more than $1 billion in profit to state programs that help the elderly.
The administration has said it began exploring the possibility of hiring a private company to manage the lottery because of concerns that the state-run system, while profitable, would not be able to keep up with what it expects to be a rapid growth of the state's senior population.
According to figures from the Department of Aging, Pennsylvania has nearly 2.3 million people over age 60, including more than 300,000 who are 85 or older. By 2030, nearly a quarter of the state's population will be older than 60, and the 85-and-older population is expected to increase by 80,000.
Under the proposed contract, Camelot would make annual guaranteed payments, and if lottery profits fell short of those amounts, the firm would reimburse the state for the shortfall - up to 5 percent of profits - from cash required to be held as collateral.
Camelot would guarantee a profit of $34 billion over the life of the 20-year contract.
The state-run system offers no similar guarantees, the administration argues. The Department of Revenue, which oversees the lottery, estimates it would generate roughly $30 billion over the same 20 years.
Even if the administration manages to get the Camelot deal back on track, another challenge awaits in court - from Democratic legislators and the union that represents lottery employees.
Contact Angela Couloumbis at 717-787-5934 or firstname.lastname@example.org, or follow on Twitter @AngelasInk.