Problem with winch, can u help?

Well after two months of me having problems with my battery running down after leaving it overnight. This past weekend while i was riding i noticed that the yellow wire running to my winch was smoking from where it was hooked to the winch, it was smoking and sparking sorta. Really the first time i had noticed it doing this, but came to find out that with me unhooking the yellow wire along with positive and negative from battery cable that it will hold charge overnight. Can anyone let me know why this is happening, I want to hook my winch back up it works fine when hooked up but what I can do to prevent it from smoking. I noticed that some of the black tape/cover that comes with the winch was peeled back and the wire was touching the winch itsself. Would it be grounding out? Causing it to spark and or smoke? seems like it does it worse when going through water. Any help would be greatly appreciated...