Oracle skipper Jimmy Spithill said his team "needed to go away and regroup" as they used their wild card to postpone the second race of the day after being thrashed by Team New Zealand who now hold a 4-1 lead.
Under the rules both teams have one opportunity to postpone one race during the finals series.
They can do that to cover off breakage or concerns over a lack of performance.
And Oracle waved the white flag for the day over their struggling performance and today's woeful tactics.
Spithill made it clear they had used this as a tactical move after being trounced by 1m 5s in the opening race.
Team New Zealand came from behind with their trademark upwind speed to destroy the Americans - and that clearly extends to a mental victory now.
"We have to go away and regroup," Spithill said.
"They have an edge upwind so we played our card strategically."
Spithill said they hadn't helped themselves with their tactical calls and "we need to address our tacking".
Spithill was in deep discussion with boss Sir Russell Coutts after the opening race of the day. Spithill said it was "a team decision" as they informed the umpires.
"We have to take a few steps and be ready for the next race," Spithill said.
A doubleheader is planned for Friday (NZ time). The postponed race could be held over till Tuesday.
But the final could be over by then. New Zealand need five more wins to win the cup and Orcle need 10 more wins to hold the Auld Mug.
This is a huge psychological blow by the Kiwis.
Team New Zealand's mastery upwind played a huge role again today as they crushed Oracle the defenders to take a commanding 4-1 lead.
Dean Barker's crew thrashed the defenders in another come-from-behind victory.
The win leaves New Zealand needing five wins to claim the Cup while Oracle still have to claim 10 to hold on to the Auld Mug.
It was another amazing turn of events in windy conditions on the bay.
James Spithill had narrowly won the start from Barker and Oracle showed great speed on the opening reach to get around the first mark four-seconds ahead of Team New Zealand.
The defenders looked powerful going downwind as well and had a lead of around 160m at one stage.
But New Zealand fought back and managed to hold Oracle's lead to 10 seconds at that bottom mark.
And that's where Oracle made a blunder.
They attempted the first foiling tack seen at that mark, trying to head offshore to Alacatraz.
But they literally stalled and team New Zealand took full advantage of that.
They slid past Oracle and then showed their superior speed and tacking ability, simply gaining big leads on every turn as they criss-crossed their way back up the course.
By the time they reached the top mark they had a 1m 17s lead and Oracle were done.
It was hugely impressively from the Kiwis as they even foiled upwind at times.
After their fightback on Monday, this was a crushing blow for Oracle.
The tactical work of their local man John Kostecki was bemusing and their lack of upwind speed alarming.
Barker was delighted with the victory though it admitted it came with some nerves.
"It's a tough way to win races but it's working for us," Barker said.
"We'd like to control our own fate a bit more around mark one. They got a bit more pressure there and stretched out.
"But it is encouraging to win again."
Oracle skipper looked pretty deflated on his boat between races as they made a change of jibs, going for a smaller one as the winds lifted for the second race.
He admitted his boat was struggling upwind.
"They definitely have some wheels upwind," he lamented.
- Fairfax Media