Cannabis stocks have plunged 50% from their highs earlier this year as a lack of movement in U.S. legalization efforts has triggered an exodus of retail traders from the sector.

Stocks are retreating after starting the year with a bang following Democrats seizing control of the Senate and raising hopes for federal legalization. The rally picked up steam in February as names like Tilray Inc. and Sundial Growers Inc. joined the growing meme-stock phenomenon, with both more than doubling in the course of three days that month.

The biggest fund in the sector, ETFMG Alternative Harvest ETF, is down 50% from Feb. 10, when it hit its highest level in nearly two years. Better known by its ticker MJ, the $1.25 billion fund saw investors withdraw a net $48.2 million between July 5 and Aug. 27, when it slid 18%.

MJ primarily tracks Canadian cannabis stocks, but U.S.-focused ones aren't performing much better, with the AdvisorShares Pure U.S. Cannabis ETF down 41% from its Feb. 10 high.

The waning interest is also reflected in retail demand. At the peak in February, retail investors bought more than $2.5 billion of pot stocks over the course of a week, data from Vanda Securities show. Since then appetite has dried up, with inflows as low as $73 million the week of Aug. 16, according to Ben Onatibia, senior strategist at the research house. [Read more at Bloomberg]