The Knights of Labor failed because of a series of ineffective strikes, disagreement with organization leadership and a bombing at a demonstration, states History.com. These factors created an environment hostile to labor unions in general, and the Knights of Labor in particular, leading to a rapid decline in membership.
The Knights of Labor developed throughout the 1870s. Workers joined the Knights of Labor in large groups to demand fair pay, eight-hour work days and other political reforms. They approached these goals through active demonstrations, boycotts and strikes. The union was secret throughout much of the 1870s until Terence Powderly became its head in 1879; he advocated open membership and more direct attempts to reach their goals.
Under Powderly, the Knights of Labor flourished, peaking with 700,000 members in 1886; however, as the union grew, so too did unrest with Powderly's policies, especially his stance against strikes. Internal dissension within the union led many to organize strikes against his wishes. Many of these strikes were ineffective, creating greater unrest within the Knights of Labor.
Simultaneously, external unease with labor unions in general was rapidly increasing in the late 1880s. In 1886, a demonstration in Chicago led to a riot, and a bomb was detonated, killing 11. The Knights of Labor took the bulk of the blame for this event, hastening its demise. By 1890, membership was only 100,000, a stark reversal of its popularity only four years earlier.