(FORTUNE Magazine) – From the galloping growth of the early 1970s, thoroughbred racing has slowed , to a pace that invites pigeons to roost. To be sure, some 50 million people played $7.6 billion on the ponies in 1985. But the number of bettors was no larger than a decade earlier, nor were their bets, when adjusted for inflation. Grandstand attendance shrank at large tracks such as New York's Aqueduct; some older, smaller tracks, like Evangeline Downs in Louisiana, closed last year for good. Other ominous signs: The going fee for service by a champion stud has dropped around 20% in the past two years, and the average price of yearlings at the Keeneland sales in Lexington, Kentucky -- the Dow Jones industrial average among breeders -- plunged to $412,000 last year from $537,000 in 1985. Tax reform is not going to help either. It will prolong the period for depreciating horses. Thoroughbred racing's share of the U.S. gambling dollar declined from 28% in 1971 to 10% in 1985, with the biggest competition coming from booming state lotteries. To help horse racing stay out of the glue factory, Kentucky breeder John R. Gaines in 1984 founded Breeders Cup Day, a world series of racing that lures top horses with million-dollar purses. Track operators are also campaigning for parimutuel tax cuts, claiming that, unlike lotteries, race tracks and stables create jobs. The industry is trying to expand into the 11 states that do not allow parimutuel betting. Texas could be the best frontier. Voters will consider legalized betting on horses in a referendum this year, and the state has no pesky lottery for the horses to race against.