As a result of his investigation, the Supreme Court of the United States ordered the breakup of the American Tobacco Company in 1911.

This issue would dominate his political career for more than a decade and put him at odds with J. C. W. Beckham, the leader of the pro-temperance faction of the state's Democratic Party.

In 1915, Stanley ran for governor, defeating his close friend Edwin P. Morrow by just over 400 votes in the closest gubernatorial race in the state's history.

Historian Lowell H. Harrison called Stanley's administration the apex of the Progressive Era in Kentucky.

[4] His father was a minister of the Disciples of Christ and served as a judge advocate on the staff of Joseph E. Johnston in the Confederate Army.

[5] He advocated for progressive reforms such as more extensive study of mine accident prevention, railroad regulation, a pure food and drug act, and an eight-hour work day.

[11] By the time of Stanley's election to the House, the American Tobacco Company had eliminated all its substantial competitors either by acquisition or by driving them out of business.

[4] Congressman Stanley came to the defense of the tobacco farmers of his district, making him virtually unbeatable as a congressional candidate.

[12] Besides his legislative efforts on behalf of farmers, Stanley also directly encouraged them to organize and keep their crops off the market until prices improved.

[12] Some of the more radical members of this group, known as the "Night Riders", used vigilante violence to compel membership in the Association during what became known as the Black Patch Tobacco Wars.

[13] Both the tax repeal and the breakup of American Tobacco helped quell the violence perpetrated by the Night Riders.

The minority report, authored by Republican Augustus P. Gardner, absolved Roosevelt and downplayed the price fixing charges.

[17] McCreary was never a serious challenger, and the primary campaign centered on Stanley and Beckham, the leaders of the two largest factions of the state's Democratic party.

[18] The support of Louisville Courier-Journal editor Henry Watterson and Representative Ben Johnson were not enough to carry Stanley to victory.

[20] Several candidates announced their intention to seek the Democratic gubernatorial nomination in 1915, but by late August, only two remained in the race.

Samuel Gompers praised Stanley for his opposition to trusts while in Congress; endorsements from local chapters of the American Federation of Labor soon followed.

Even Harry McChesney, Stanley's primary opponent, urged Kentuckians to vote a straight Democratic ticket.

Knowing that a challenged election would be decided by the heavily Democratic General Assembly, Morrow conceded a week later.

[10] The one progressive measure that did not pass, a bill granting women's suffrage, failed in the House by a single vote.

[31] At issue was reform of the state's tax code, which Stanley felt unjustly burdened agricultural interests.

[31] Additional taxes were passed on distilled spirits, oil production, race tracks, and corporate licenses.

[33] Assessments on the value of property, which had typically been evaluated at one-third to one-half of fair market price, rose dramatically.

The legislature established and funded a state Council of Defense,[33] but Stanley vetoed a bill that would have banned the teaching of German in public schools.

[33] Though the national mood was against the Democrats, a letter of support from President Woodrow Wilson bolstered Stanley's campaign, and he defeated Bruner by more than 5,000 votes.

[38] Louisville Courier-Journal editor Robert Worth Bingham added his endorsement, calling Sackett "one of the best men I know".

In the 1927 gubernatorial election, he threw his support to his old enemy, J. C. W. Beckham, hoping to improve his chances of returning to the Senate in 1930.

[43] Beckham lost to Republican Flem D. Sampson, greatly diminishing Stanley's chances in the senatorial campaign.

[43] In 1930, President Herbert Hoover appointed Stanley to the International Joint Commission, a body charged with settling boundary disputes between the United States and Canada.

[10] He was proud of his service on the Commission, and once noted that nowhere on earth have two great powers lived so long as neighbors with so few disputes.

[37] His grandson, Augustus Owsley Stanley III (1935–2011), became a well-known LSD chemist and backer of the Grateful Dead during the hippie movement.