Interestingly, in the backdrop of the sorority’s genesis stood the very powerful and dangerous Ku Klux Klan. Racism, no doubt, thrived in both Indiana and the country; racial injustice therefore sparked the birth of the second the Ku Klux Klan. Established in 1915 in Stone Mountain, Georgia, the new Ku Klux Klan of the twentieth century evolved from two national events that year: the anti-Semitic lynching of engineer Leo Frank in Atlanta; and the release of D. W. Griffith’s masterpiece, Birth of a Nation. Unlike the original Ku Klux Klan of  Reconstruction, the second Klan targeted a variety of groups, including Jewish Americans, Catholics, recent European ethnic immigrants, Latinos, East Asians, and feminists. The secret society grew to record proportions in the 1920s, especially in the Midwest. Indiana particularly stood out as a major center of Klan activity. With 300,000 members in the early 1920s, the Indiana Klan comprised one third of the native-born White male population in the state. D. C. Stephenson, the Grand Dragon of the Indiana KKK, since 1924, resided at 5432 University, in Irvington, Indianapolis, literally right next to Butler University. Madge Oberholtzer, the educator Stephenson raped and kidnapped in 1926, also lived in Irvington.

The founders of Sigma Gamma Rho Sorority also faced many aspects of racism on the campus of Butler College. Since its founding in 1855, Butler had been open to African American applicants.The school itself practiced de facto segregation in numerous ways. The university in 1927 adopted a quota system that admitted only ten African American students annually. As a result, the university’s Black enrollment declined from seventy-four in the 1926-1927 year to fifty-eight, and included nine entering freshmen. The university yearbook, "The Drift", did not represent African American students very well. In 1925 there are no pictures of African American students in the junior or senior sections of the yearbook. These realities suggest that African Americans on the campus were met with a degree of racial hostility. However, the quota system at the university was lifted in 1948.

Nevertheless, the sorority’s founders pressed on Sigma Gamma Rho Sorority, Inc., founders Dr. Mary Lou Allison, Dr. Nannie Mae Gahn, Dr. Vivian White, Dr. Bessie Downey, Dr. Cubena McClure, Dr. Dorothy Hanley, and Dr. Hattie Mae Dulin quietly began their society for teachers and sought to make a difference. In doing so, they indirectly challenged perceived early twentieth-century notions about race and gender. They subtly defied the local KKK when they established their society for college-educated African American women. Ignoring the commonly held view that African American women were intellectually, culturally, and sexually inferior, the seven founders relied on racial autonomy, community building, and constructive activism in an effort to topple racism, poverty, and hopelessness.