The Global X Cannabis ETF (POTX) that launched on Thursday is the sixth U.S.-listed ETF focused on the marijuana industry, the fifth to debut this year and the fourth to begin trading since July.

It’s giving a whole new meaning to “Reefer Madness,” which refers to the infamous 1936 anti-marijuana movie and now can be applied to burgeoning efforts to legalize the plant across the U.S. and to cash in on the movement from an investment perspective. 

Global X is no stranger to thematic ETFs such as this, and one of the value propositions for its new POTX fund is that its expense ratio of 0.50% is the cheapest among the three passively managed cannabis ETFs. The other two passive products—the ETFMG Alternative Harvest ETF (MJ) and Cannabis ETF (THCX)—charge 0.75% and 0.70%, respectively. The lowest-cost fund in this category is the actively managed Cambria Cannabis ETF (TOKE) with a fee of 0.42%.

The Global X fund’s index contains companies with at least 50% of their sales, operating income or assets tied to the cannabis industry. That entails the legal production, growth and distribution of cannabis and industrial hemp, along with pharmaceutical applications and providing financial services to the cannabis industry.

Recreational marijuana is legal in 11 U.S. states and the District of Columbia, and 33 states have legalized medicinal marijuana. But pot remains illegal at the federal level.

This hodgepodge map of legality, or to put it another way, the lack of federalized legality in the U.S. presents a sticky wicket regarding the types of cannabis-related companies that can be listed on U.S. exchanges and what U.S.-listed cannabis ETFs can directly invest in.

As such, the portfolios of all U.S.-listed cannabis ETFs have heavy weightings toward Canada, where marijuana is federally legal and where cannabis growers are listed on stock exchanges. Some funds in this group have a Canada weighing as low as 50%. The new Global X fund has a 81% weighting in Canada, followed by 11% in the U.S. and 8% in the U.K.

The pharmaceuticals industry is the fund’s largest sector weight at 91%.

Big Potential But Little To Show For It

It seems inevitable that recreational marijuana will become legal in more states, and eventually could become legal nationwide. If the latter happens, the U.S. would almost certainly become a huge market for recreational weed. And other countries besides Canada and Uruguay—to date the only nations to legalize marijuana—will likely join the bandwagon if governments see it as a way to put more money in their coffers.

Meanwhile, medicinal marijuana is where the real action is for now and is an area with significant upside potential. All of the cannabis ETFs contain literature extolling the growth potential of the cannabis trade, including this factoid from the new Global X fund: Global sales of legal cannabis are projected to hit $14.9 billion this year, representing a 36% year-over-year gain. But that’s just 9% of the estimated total addressable global market of $166 billion.

The future of cannabis might be sunny, but for now it’s raining on the parade of investors in U.S.-listed marijuana ETFs. The only one of the group that existed before the year began—the ETFMG Alternative Harvest ETF—is down nearly 3% year-to-date. That massively trails the 21.6% return on the SPDR S&P 500 ETF (SPY).

Both the ETFMG fund and the actively managed AdvisorShares Pure Cannabis ETF (YOLO), the only two that have been around the entire third quarter, are down 24.2% and 22.4% quarter-to-date, respectively (SPY is up 2.8%). And all five U.S.-listed pot ETFs are down during the past month, with the declines ranging from 7.7% to 9.7%. SPY is up 4.2% during this period.

Why the disconnect between a fast-growth industry and the poor performance of the funds that track it? The reasons include negative headlines about slower-than-expected sales of recreational weed in Canada, which is more a supply problem (i.e., distribution bottlenecks) than a demand issue. In addition, investors have been spooked by reports about unlicensed growing at CannTrust, upheaval when market leader Canopy Growth removed its high-profile CEO, and an FDA warning letter to Curaleaf for making unsubstantiated health claims and for misbranding their products as drugs. And continued regulatory uncertainty in the U.S. is a lingering issue.

The growth potential for cannabis is enticing, and investors with long-term horizons might see the slow start by marijuana ETFs as a buying opportunity. But at least for now, the sector has been a buzzkill.