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HANCOCK COUNTY, W.Va.—Casinos have pumped more than $8 billion into the U.S. horse racing industry in the past two decades, propping up a sport beset by an eroding fan base, according to a Wall Street Journal analysis. But market congestion from the recent casino-building boom across the East is cutting into some casinos’ revenue, bringing new woes to nearby tracks.

At West Virginia’s Mountaineer thoroughbred horse track, about 50 patrons sat at picnic tables to watch the evening’s races one recent Tuesday. The purse money, which is used to reward owners of top-finishing horses, was funded in part by revenue from Mountaineer’s casino next door.

“The machines, like them or not, they’ve saved racing,” said Donald Blankenship, a 58-year-old horse trainer and owner, referring to the slots. “I don’t know where we’d get the purse money from if we didn’t have them.”

These financial ties between horse racing and casinos date to the 1990s, when casinos were springing up around the U.S., and both horse tracks and horse owners sought a piece of the action. Today, tracks in 16 states use money from casino games such as slot machines or blackjack to help fund racing, according to the American Gaming Association.

The Journal’s analysis from 14 states that provided data shows the racing industry has pulled in at least $8.2 billion from casinos. Proponents of the subsidies say the funds help support local farms while also attracting higher-quality racehorses with fatter purses. Purses vary by state, but averaged about $27,000 a race last year for thoroughbreds, according to the Jockey Club, a North American breed registry.

In Maryland, slots money has turned around the sport of horse racing and helped local horse breeding since 2010, according to the state racing commission. In New York, a top horse-racing state, several racetrack casinos have pumped more than $1.1 billion into racing since 2004, the New York State Gaming Commission said.

Subsidized racing has reached many other states in the East, where the number of casinos has soared, and beyond. Track-supported casinos—known as “racinos” when they are adjoined—have popped up from Massachusetts to New Mexico.

As a result of casino-market saturation, however, the sport of racing and its key players are grappling with a loss of revenue in some states. Sharp drop-offs in the flow of casino funds to racing in West Virginia and Delaware have exposed the sport’s reliance on these infusions as it struggles to find a new generation of fans.

Casino money is “just a Band-Aid, it’s not a solution” for horse racing, said Karyn Malinowski, who directs the Equine Science Center at Rutgers University.

The emergence of Pennsylvania and Maryland casinos in the past decade has hammered Delaware’s three racinos. The amount of casino money going to horse racing in that state, where slots first appeared at racetracks 20 years ago, has plunged almost 50% since 2008 to $35.7 million last fiscal year, according to state data.

Uncertainty shadows even Pennsylvania’s horse industry, which got a major boost from a 2004 casino law. With new competition from Ohio casinos, casino revenue growth has slowed in Pennsylvania— rising just 2% to $3.1 billion in fiscal 2015. Meantime, Pennsylvania lawmakers diverted $184 million in casino revenue earmarked for horse racing to the state general fund from 2010 to 2013.

Lawmakers in a few other areas have scaled back the subsidies. In cash-strapped West Virginia, lawmakers last year held back 10% of the casino money typically headed to racing. In New Jersey, Gov. Chris Christie stopped a $30 million-a-year subsidy from casinos after 2010 as part of broader overhauls of the racing industry.

Horse racing still faces a long-term question of “can the industry still prosper, given all the competing ways that people can entertain themselves and even gamble,” said William Ryan, chairman of the Pennsylvania Gaming Control Board.

The live racing “handle”—the sum of bets placed by people at tracks—plummeted 43% to $1.3 billion between 2003 and 2013, according to the most recent data from the Association of Racing Commissioners International Inc. The overall handle, which takes into account off-track betting, is also down, according to groups that track data for thoroughbred and harness racing.

West Virginia’s two thoroughbred tracks—Mountaineer in the northern panhandle, Charles Town in the eastern panhandle—both face declining revenue at adjacent casinos. Through June, the casinos had pumped $887 million into racing purses in the last two decades, the state said. But that support has fallen from $67.6 million in 2005 to $35.3 million last fiscal year, reflecting pressure on casinos and the Legislature’s move to retain some revenue.

At Mountaineer, horses will run 160 days this year, down from the 210 days that the state typically requires. Eldorado Resorts Inc., a Reno, Nev., company that owns Mountaineer, declined to comment.

Charles Town has 193 days of racing scheduled this year, one more than last year but down from 221 days in 2013. Officials there say purses and the number of horses per race remain competitive, but the track will need more schedule cuts to manage pressure on the business, said Chris McErlean, vice president of racing at Charles Town owner Penn National Gaming Inc.

“We want to see racing survive and thrive, but we know in a lot of places the current model isn’t sustainable,” he said.

Former Charles Town jockey Larry Reynolds, who benefited when slots rejuvenated the track in the late 1990s, quit the business this year to work for a cable company. “I’m hoping there’s a future in [racing], but unfortunately the writing’s on the wall, and it doesn’t look promising,” he said.

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