"The fact that Penn State will offer fewer scholarships over a period of four years does not plausibly support its allegation that the reduction of scholarships at Penn State will result in a market-wide anticompetitive effect," Kane wrote.
Corbett said he was disappointed in the decision and was reviewing the ruling to determine if he would appeal.
He said he believed the sanctions have harmed the citizens, students, athletes, alumni, and taxpayers of Pennsylvania.
"I feel strongly that the claims we raised in this lawsuit were compelling, and these issues deserved a complete and thorough review by the court," Corbett said in a statement.
The NCAA did not respond to a request for comment.
Kane's decision came on the same day that a Quinnipiac University poll found that 46 percent of Pennsylvania voters found the sanctions "too severe" while 32 percent found them appropriate.
In a hearing last month, attorneys representing the Corbett administration argued that the sanctions posed a threat to the market for top athletes and would damage a broad spectrum of the economy. The NCAA disputed that contention and said it took what it called "extraordinary action" to protect the integrity of collegiate athletics.
The sanctions were ordered following the 2012 conviction of Sandusky, a former Penn State assistant football coach, who is now serving a 30- to 60-year prison term for sexually abusing 10 boys.
The sanctions are the subject of two other lawsuits still in the courts: one filed by members of Paterno's family, Penn State trustees and others who want sanctions overturned, and another filed by state Sen. Jake Corman (R., Centre), whose district includes Penn State, seeking to keep the fine money in Pennsylvania.
State records show that the Corbett administration signed a $200,000 contract with the law firm Cozen O'Connor to handle the NCAA case in January with an initial $200,000 cap for total costs.
In April, the contract was increased to $400,000 to cover attorneys' fees, ranging from $290 to $545 an hour.
Contact Amy Worden at 717-783-2584 or firstname.lastname@example.org or follow @inkyamy on Twitter.
Inquirer staff writer Angela Couloumbis contributed to this article.