May 7 (Reuters) - New proposed federal rules governing

marijuana has so far failed to spark fresh buying interest in

exchange traded funds (ETFs) tracking the shares of North

American cannabis companies, despite strong performance this

year.

Marijuana ETFs and cannabis stocks shot higher last week

after the U.S. Justice Department said it plans to reclassify

marijuana as a less dangerous drug. Big gainers included the

Roundhill Cannabis ETF, AdvisorShares Pure Cannabis ETF

and Amplify U.S. Alternative Harvest ETF ( MJUS ),

which are all sitting on year-to-date gains of 29.6% to 36.6%,

putting them among the top ETF performers of 2024.

However, the gains are yet to translate into asset growth

for many of the funds - suggesting ETF investors are wary about

placing new, sizeable bets on the sector.

Of the nine cannabis-focused ETFs in the U.S. market, only

two - the AdvisorShares MSOS 2x Daily ETF and the

AdvisorShares Pure US Cannabis ETF - seen any inflows

since the Justice Department's announcement, according to data

from LSEG Group.

"The runups we've seen have been driven by cannabis-focused

investors who have been waiting for this news but who already

have money in a handful of their favorite stocks," said Steve

Sosnick, market strategist at Interactive Brokers.

Some analysts believe the wariness of ETF investors to dive

into cannabis funds could mean a shakeout is looming for the

segment. Already this year, GlobalX Funds has shuttered its $29

million GlobalX Cannabis ETF. GlobalX has declined comment on

the closures, but analysts noted that those ETFs that were axed

had been slow to accumulate significant assets.

"This is a relatively crowded niche offering," said Todd

Rosenbluth, head of research at Vetta Fi. "If demand fails to

materialize in 2024, we could see additional closures."

But analysts also said the funds could start drawing

money if the Justice Department proposal to reclassify cannabis

tempts a new wave of investors to focus on the industry.