This trick was written about circa early 18th century. It was described in the unpublished Asti Manuscript, c. 1700, p. 77 of the Pieper translation. This manuscript was translated in Gibecière, Vol. 8 No. 1, Winter 2013, p. 29-234. The idea didn't hit the published page until Diego Zamorano's Thesoro Atractivo de Curiosos, 1740, p. 118 of the Pieper translation. The English translation was included in Gibecière, Vol. 6 No. 2, Summer 2011, p. 97-176. Zamorano describes it using a small, short sword (which sounds like a large knife depending on your perspective). Zamorano gives two methods and in both cases he suggests spreading the cards on the table.
This effect can later be found in Edmé-Gilles Guyot's Nouvelles Récréations, Physiques et Mathématiques, 1769, p. 7 of the Hugard translation (unpublished). The cards were strewn on the floor and the selection or selections stabbed with a sword. In Testament de Jérome Sharp, 1785, p. 172 of the Hugard translation (unpublished), Henri Decremps described the same effect, but in a final note mentioned that, if you found yourself without a sword, a knife could be used, with the cards spread on a table to avoid your assuming an awkward position.
German performer (Italian by birth) Dario Païni (1867-1935) was thought to be the first or among the first to adopt it in professional performances; see Reinhard Müller's Païni Potassy Pasteboards, 1999, p. 5. Around the same time Max Malini was performing his own version. August Roterberg included a version for a penknife and table, “the Pierced Card” in New Era Card Tricks, 1897, p. 136.
In the early 20th century, several performers started doing the blindfold stab at a table, using multiple utensils. The first may have been Fred Moore; his trick is obliquely mentioned in Conjurer's Monthly, Vol. 2 No. 9, May 1908, p. 64, and an illustration of him performing the effect using three darts appears that same month in The Wizard, Vol. 33 No. 3, May 1908, p. 526. Moore's method is apparently unrecorded. From the brief descriptions that exist, it was probably similar to the one devised by Douglas Dexter for his celebrated version using three white-handled knives. His method wasn't published until several decades after his death in 1937. However, there are published accounts of his performing and teaching the routine at least as early as 1915 (see The Magic Circular, Vol. 9 No. 99, Jan. 1915, p. 42). It became one of Dexter's best known routines, to the point that in the early 1930s a similar routine done by Rupert Howard led to a court case, with Dexter suing Howard for theft and Howard suing Dexter for slander. Accounts make it clear that it was an unpleasant episode, and the results were not satisfactory to either party; see The Magic Wand, Vol. 31 No. 196, Dec. 1942, p. 166.
Perhaps the earliest instance of a duplicate card being hidden in a pocket in the covering sheet of newspaper is by J. Hart Smith in The Magician Monthly, Vol. 14 No. 9, Aug. 1918, p. 120. Smith's write-up of it is an installment in a series entitled “A Page For the Beginner,” and he introduces it with: “This, one of the most effective of card tricks, may be simplified for the amateur by the following method.” Walter B. Gibson, in his Two Dozen Effective Practical Card Tricks, 1927, p. 31, describes (but doesn't seem to claim) the idea of having a duplicate waxed to the underside of a folded piece of newspaper. Louis C. Haley's “The Divining Knife” is a version in which a knife is stabbed into the side of a wrapped deck so that the blade goes between two selections. It appears in Joe Ovette's Bargain Magic, 1921, p. 5. Of interest is this prefatory comment: “Contrary to the usual procedure in this effect where the pack is bridged or a forcing pack of two kinds in 26 sets is used, or a broad pack is secretly exchanged for a narrow one, this effect is produced with any pack and without any such subterfuges.” Haley's method is a jog. This mention of using a two-way forcing pack reflects on the idea of such a pack with the two force cards alternating in the deck, which was published by Stuart Brampton in Ellis Stanyon's Magic, Vol. 9 No. 8, May 1909, p. 58. This negates the claim that Del Ray came up with this application for a two-card stab, although he may have added the idea of using a faro shuffle to alternate the duplicates (see Jon Racherbaumer's note in The Linking Ring, Vol. 83 No. 1, Jan. 2003, p. 90). A similar idea was published by Alton Sharpe in Expert Card Mysteries, 1969, p. 163, “The Great Stabbing Trick”. Ed Marlo published the idea of splitting the deck at the knife and tearing the wrapped halves of the deck apart, substituting the top and bottom cards for those actually stabbed at. See “Simplex Card Stabbing” in Oddity and Other Miracles, 1945, p. 82 of Early Marlo. However, this method also appeared, without mention of an originator, in The Tarbell Course in Magic, Vol. 3, 1943, p. 274.