In 1795, Pinckney’s Treaty between the United States and Spain granted Americans the right to navigate the Mississippi, a right soon completely assured by the Louisiana Purchase of 1803. Enactment by the federal government of the Alien and Sedition Acts (1798) promptly provoked a sharp protest in Kentucky. The state grew fast as trade and shipping centers developed and river traffic down the Ohio and Mississippi increased.

The War of 1812 spurred economic prosperity in Kentucky, but financial difficulties after the war threatened many with ruin. The state responded to the situation by chartering in 1818 a number of new banks that were allowed to issue their own currency. These banks soon collapsed, and the state legislature passed measures for the relief of the banks’ creditors. However, the relief measures were subsequently declared unconstitutional by a state court. The legislature then repealed legislation that had established the offending court and set up a new one. The state became divided between prorelief and antirelief factions, and the issue also figured in the division of the state politically between followers of the Tennessean Andrew Jackson, then rising to national political prominence, and supporters of the Whig Party of Henry Clay, who was a leader in Kentucky politics for almost half a century.

Kentucky was made (1776) a county of Virginia, and new settlers came through the Cumberland Gap and over the Wilderness Road or down the Ohio River. These early pioneers of Kentucky and Tennessee were constantly in conflict with the Native Americans. The growing population of Kentuckians, feeling that Virginia had failed to give them adequate protection, worked for statehood in a series of conventions held at Danville (1784–91). Others, observing the weaknesses of the U.S. government, considered forming an independent nation. Since trade down the Mississippi and out of Spanish-held New Orleans was indispensable to Kentucky’s economic development, an alliance with Spain was contemplated, and U.S. General James Wilkinson, who lived in Kentucky at the time, worked toward that end.

However, in 1792 a constitution was finally framed and accepted, and in the same year the Commonwealth of Kentucky (its official designation) was admitted to the Union, the first state W of the Appalachians. Isaac Shelby was elected the first governor, and Frankfort was chosen capital. U.S. General Anthony Wayne’s victory at the battle of Fallen Timbers in 1794 effectively ended Native American resistance in Kentucky.

When the Eastern seaboard of North America was being colonized in the 1600s, Kentucky was part of the inaccessible country beyond the mountains. After Robert Cavelier, sieur de La Salle, claimed all regions drained by the Mississippi and its tributaries for France, British interest in the area quickened. The first major expedition to the Tennessee region was led by Dr. Thomas Walker, who explored the eastern mountain region in 1750 for the Loyal Land Company. Walker was soon followed by hunters and scouts including Christopher Gist. Further exploration was interrupted by the last conflict (1754–63) of the French and Indian Wars between the French and British for control of North America, and Pontiac’s Rebellion, a Native American uprising (1763–66).

With the British victorious in both, settlers soon began to enter Kentucky. They came in defiance of a royal proclamation of 1763, which forbade settlement west of the Appalachians. Daniel Boone, the famous American frontiersman, first came to Kentucky in 1767; he returned in 1769 and spent two years in the area. A surveying party under James Harrod established the first permanent settlement at Harrodsburg in 1774, and the next year Boone, as agent for Richard Henderson and the Transylvania Company, a colonizing group of which Henderson was a member, blazed the Wilderness Road from Tennessee into the Kentucky region and founded Boonesboro. Title to this land was challenged by Virginia, whose legislature voided (1778) the Transylvania Company’s claims, although individual settlers were confirmed in their grants.