Zach Lowe of ESPN confirmed a report from Albert Nahmad that Gay had activated the option.
Gay, 30, played well for the Kings when he was healthy last season, averaging 18.7 points and 6.3 rebounds in 30 games. But he ruptured his Achilles tendon in January and missed the rest of the season, and it remained uncertain if he would return to the Kings or test the free-agent waters.
The Kings certainly wanted Gay to remain on the roster.
"His personality, when we talk about who’s going to fit on this team, he’s exactly what we’re looking for," general manager Vlade Divac said in April, per Jason Jones of the Sacramento Bee.
But with the team building around a young core that includes Buddy Hield, Skal Labissiere, George Papagiannis and Willie Cauley-Stein, Gay perhaps didn't want to undergo a rebuilding effort. Instead, testing free agency will allow him to not only acquire a bigger payday but perhaps join a contending team as well.
As for the Kings, they were always a long shot to be playoff team in 2017-18. Without Gay, the odds have grown that much longer.