Breaking Down the Legality of Psychedelics Investments

In the new age of psychedelics investing, many newcomers are wondering exactly how legal this exciting new industry is — and whether now is the time to put money into it.

The business of psychedelics has evolved to the point where it’s possible to invest in various companies, and the capital markets are starting to pay attention.

But is it safe to get involved? And what information should investors know beforehand?

Adele Byrne, a lead researcher with drug data group Prohibition Partners, told the Investing News Network that she sympathizes with anyone looking to invest with little to no knowledge.

Right now, the growing interest in psychedelics businesses relates to the untapped medical potential of substances like psilocybin, LSD and MDMA. Encouraging studies have shown what they may be capable of, and now a wide variety of pharmaceutical-leaning companies are launching studies or hoping to complete research programs validating various medical premises.

Byrne explained that in the US, these drugs are scheduled substances that are illegal to grow or sell according to federal law; however, they are available under a research capacity.

The US Food and Drug Administration has shown a willingness to engage with psychedelic substances and their medical benefits, adding to the drive behind the investment story of psychedelics.

“I think it’s a domino effect … and I think it won’t be long before you see these (substances) moving out of Schedule I status, and be more widely accessible,” Byrne said in regards to general projections for test results from medical studies on psychedelics in the coming years.

In Canada, psychedelics — more specifically psychedelic compounds like psilocybin, which is found in common-use items like magic mushrooms — are under the jurisdiction of the Controlled Drugs and Substances Act, and fall under the Schedule III category. The act defines a controlled substance as one included in the five scheduling categories with one Schedule I, II, III, IV or V.

Canada defines controlled substances as “any type of drug that the federal government has categorized as having a higher-than-average potential for abuse or addiction.” The categories go in ascending order in terms of potential for abuse or addiction.

In an online Q&A, Los Angeles-based Zuber Lawler attorney Josh Lawler said the psychedelics industry faces an uphill battle for legal reform, since state jurisdictions don’t have as much incentive to put forth legal programs defying federal law in the same way they did for cannabis.

“The most effective way of changing public perception is through clinical studies on treatment-resistant depression and PTSD,” he said.

First real legal precedent-setting moves

Amid the increasing attention for psychedelics and the rising capital funding available for companies attached to this sector, investors should know there still has been very little in terms of legal movement towards a free-flowing market.

Canada set a precedent in August, when four terminally ill patients were granted access to psilocybin as a treatment for relief. The ruling came from Health Minister Patty Hajdu.

The decision was granted under a Section 56 exemption under the Controlled Drugs and Substances Act.

Bruce Tobin, founder and chair of TheraPsil, a Canadian company working to aid patients facing end-of-life distress, told Vice News the decision by Hajdu was a very important step.

“Those of us who have been veterans in the field of clinical psychology understand all too well that there’s just a very wide range of patient cases that the state-of-the-art isn’t up to treating very well.”

In addition to serving as a critical first step towards potential legalization efforts, this decision mirrors the legalization path taken by cannabis, which also started with a Section 56 exemption.

This represents just one of the various parallels the two industries have drawn from an investment and developmental angle.

But however exciting this news is in the big picture, investors should maintain realistic expectations about how soon any kind of legalization reform will arrive in Canada.

Even so, momentum is piling up already. During an online webinar hosted by law firm Aird & Berlis, Evan Levine, CEO of PsyBio Therapeutics, indicated that players within the rapidly expanding industry are not operating with the idea of a uniform legalization program any time soon.

“We are not betting on any type of legalization movement,” Levine said during the event. “We’re developing these products to go through traditional Phase 1, 2, 3 research studies.”

US scores major victories for carving legalization path

In addition to voting for the president of the country, voters in Oregon and Washington, DC, were asked to vote on two key measurements for the psychedelics industry at-large.

The two successful measurements proved the grassroots support for alternative drugs and policy incorporating these as a viable option.

In Oregon, voters passed measure legalizing psilocybin mushrooms for controlled therapeutic use. Meanwhile DC voters said yes to policy decriminalizing psychedelic substances in the form of certain psychedelic plants and fungi.

“Healthcare professionals, veterans, mothers, people struggling with depression, anxiety, addiction and end of life distress, community organizations, and so many others answered to call for a new option to help so many who are suffering,” the campaign in Oregon said.

Investor takeaway

In writing for Scientific American, Matt Lamkin, an associate professor with the University of Tulsa College of Law, argued that psychedelics could be evaluated not just from a distinct treatment medical use, but as a wellbeing item for people pursuing healthier living:

If prescribing mind-altering drugs to help healthy people achieve desirable mental states falls within the bounds of legitimate medicine, what is left of the concept of recreational use?

These line-drawing challenges argue for moving away from the drug war’s simplistic, punitive approach in favor of more sophisticated strategies for minimizing the risks of psychotropic drugs.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.