Can't share iCloud downloaded files from Finder; only works from iCloud.com

I have iCloud files enabled on my MacBook Air M4. All of my documents are stored in iCloud. I can use them on the web, as well as locally. I keep many of these files (and folder) downloaded on my Mac, but otherwise they are all stored in the cloud.

I can share files and folders without problem from iCloud.com. This so far has not been possible using Finder. Whether the file is downloaded permanently, is sync'd to both my local device and the cloud, or just in the cloud, I either can't create a sharing link or send email with a link. I've tried using the Collaboration option, as well as both sets of privileges (Edit or Viewing). Note that I also had this problem with Sequoia, but using iCloud to share has not been a problem.

Is anyone else experiencing this issue? If yes, were you able to resolve it? I've checked and rechecked Settings and all seems in order.