This sentiment is underscored by a variety of recent positive developments, including the FDA's approval of Johnson & Johnson’s (NYSE:JNJ) ketamine-derived nasal spray to combat treatment-resistant depression, and an initiative to study MDMA-assisted therapy efficacy for post-traumatic stress disorder (PTSD) and alcohol use disorder in veterans.
In addition, alternative medicine advocate Robert F. Kennedy Jr.’s appointment as head of the US Department of Health and Human Services has created potential for further policy shifts related to mental health and psychedelics research.
Combined, these factors could make 2025 a pivotal year for the industry.
Legal state psychedelics markets take shape
Psychedelic compounds remain federally illegal in the US, but some states have pursued legalization and decriminalization. In November 2020, Oregon became the first state to legalize psilocybin for therapeutic use through the Oregon Psilocybin Services Act. From 2021 to 2022, the Oregon Health Authority and the Psilocybin Advisory Board created rules for the act and began taking applications on January 2, 2023.
Oregon also decriminalized personal possession of all drugs in 2020 through the Drug Addiction Treatment and Recovery Act, which went into effect in February 2021. Many of the provisions in that bill have since been reversed, with the possession of small amounts of hard drugs like fentanyl, methamphetamine and heroin being recriminalized as of September 1, 2024. However, psilocybin remains legal for therapeutic and facilitated use.
As of the end of March, Oregon Psilocybin Services counted 374 state-wide psilocybin facilitators, 29 service centers, 10 manufacturers and 808 worker permits. Satya Therapeutics, located in Ashland, is recognized as one of the state’s most experienced and successful service providers, with roughly 40 to 50 clients serviced monthly.
Publicly traded Florida-based cannabis company Kaya Holdings (OTCQB:KAYS) was awarded a license to operate a psilocybin service center in Oregon through its Fifth Dimension Therapeutics subsidiary in May 2024. Its treatment center, called the Sacred Mushroom, opened its doors in Portland on July 2, 2024.
In 2025, industry advocates are focused on analyzing outcomes from Oregon's psychedelics program in order to fine tune areas requiring improvement. In February, state lawmakers sought to expand psychedelic therapy through the introduction of HB 3817, which establishes an access pathway for individuals with PTSD to access ibogaine. At the time of this writing, the bill had not yet been scheduled for a public hearing or committee vote.
Despite its growth, affordability has been a barrier to the development of Oregon’s psilocybin therapy program, with sessions typically costing over US$1,500. Some communities in the state also voted to ban psilocybin and psilocybin businesses in 2024, reflecting ongoing public concerns about drug liberalization.
In Colorado, a series of legislative actions regarding psychedelic substances led to state legalization in November 2022. Proposition 122 legalized regulated access to psilocybin and psilocin in healing centers for adults over 21, decriminalized the personal use and cultivation of these substances and established a Natural Medicine Advisory Board.
SB 23-290, signed in May 2023, amended Proposition 122's regulations and created a legal framework for healing centers. HB 22-1344, passed in June 2022, paves the way for MDMA-assisted therapy for PTSD if federally approved.
The final rules for licensed psilocybin therapy centers were filed with the secretary of state and became effective on December 15, 2024. Colorado then began accepting applications for licenses. In March, the Department of Revenue issued its first healing center license to the Center Origin in Denver. As of May 2 of this year, there were over 50 pending applications for healing centers, cultivation facilities and manufacturers.
As the psychedelics industry begins to take shape in Colorado, Tasia Poinsatte, the state’s director of the nonprofit Healing Advocacy Fund, told Stateline that centers plan to offer sliding-scale rates and discounts for veterans, Medicaid enrollees and low-income individuals to help address the affordability problem.
New psychedelics laws and research initiatives
Apart from Oregon and Colorado, a wave of legislative activity concerning psychedelics is evident across the US, with states like Illinois, Indiana, Missouri, Maine and New York pursuing various forms of legalization, including decriminalization, research funding and regulated therapeutic programs. Additionally, several cities in Washington and Michigan have decriminalized certain substances, with Washington also considering bills to create a regulated psilocybin services market and to provide funding to study ibogaine for opioid use disorder.
Utah passed legislation in March 2024 to create a program for psilocybin and MDMA as alternative treatments at the University of Utah Health and Intermountain Health. The program began in May 2024 and will run for three years.
Multiple institutions in Maryland, Texas and North Carolina are also conducting studies to assess the efficacy of psychedelics in treating various mental health conditions.
Senate Bill 242 established a working group tasked with studying the therapeutic use of entheogens in Nevada in 2023. A recommendations report was delivered in December 2024, and has garnered support from key legislative figures.
Several cities in California have deprioritized the enforcement of laws against the personal use and possession of certain psychedelics, and the state is considering a psilocybin pilot program for veterans and first responders.
Massachusetts has multiple bills focused on decriminalization and therapeutic pilot programs. In April of this year, New Mexico's governor signed a bill for a therapeutic psilocybin program.
Meanwhile, Rhode Island has a bill that would legalize psilocybin possession if the federal government reschedules it, and Alaska established a task force in May 2024 to prepare for potential federal legalization of psychedelic therapies.
These actions reflect a shift in psychedelics sentiment and a growing trend of exploring their therapeutic potential.
Psychedelics investing options
To track the financial health of the psychedelic industry, investors can use the Psychedelic Invest Index, which monitors publicly traded companies in the space. Some of the top stocks in the index include Pasithea Therapeutics (NASDAQ:KTTA), MindMed (NASDAQ:MNMD), Compass Pathways (NASDAQ:CMPS) and Cybin (NYSEAMERICAN:CYBN), all of which are involved in developing psychedelic compounds for mental health treatments.
MindMed has developed a synthetic LSD analog, MM120, currently in Phase III trials for generalized anxiety disorder (GAD) and major depressive disorder (MDD). An oral tablet of MM120 was awarded a patent in July 2024.
Cybin has developed a proprietary deuterated psilocybin analog called CYB003, as well as CYB004, a proprietary deuterated DMT compound; both are protected by patents. The company also acquired SPL028, another deuterated DMT compound, through its merger with Small Pharma in 2023. Phase 2 CYB004 topline safety and efficacy data in GAD is expected in H1 2025. A pivotal study of CYB003 is scheduled for mid-2025.
Meanwhile, Compass Pathways' Phase 2b randomized controlled study evaluating its synthetic psilocybin therapy, COMP360, is the most extensive psilocybin clinical trial to date. With data presented in 2022, the trial found that one 25 milligram dose of COMP360 resulted in a decline in depressive symptoms after three weeks when combined with psychological guidance, with positive effects reportedly lasting for as long as 12 weeks.
Other key players in the psychedelics market include atai Life Sciences (NASDAQ:ATAI), GH Research (NASDAQ:GHRS), Bright Minds Biosciences (NASDAQ:DRUG) and Silo Pharma (NASDAQ:SILO).
Canadian companies in the sector include Numinus Wellness (TSX:NUMI,OTCQB:MTPLF), Optimi Health (CSE:OPTI,OTCQX:OPTHF), BetterLife Pharma (CSE:BETR,OTCQB:BETRF), Pharmala Biotech (CSE:MDMA,OTCQB:MDXXF) and Restart Life Science (CSE:REST,OTC Pink:NMLSF).
Other avenues for investors include strategic investments in specialized real estate ventures.
Healing Realty Trust (HRT) specializes in acquiring healthcare infrastructure assets, focusing on developing mental and behavioral healthcare facilities. The company established preferred real estate partnership agreements with providers like NeuroSpa, Cambridge Biotherapies and Cathexis in 2024. It has also secured the first tranche of a US$25 million Series A funding round, with the money earmarked to acquire healthcare facilities in Texas, Ohio and Connecticut.
HRT is reportedly preparing for an initial public offering, with a potential listing in late 2025 or early 2026.
Investor takeaway
Against this backdrop, the psychedelics market could see promising growth in 2025.
While challenges remain, the expansion of legalization and decriminalization, combined with ongoing research, positions the industry for growth and presents potential opportunities for investors.
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Securities Disclosure: I, Meagen Seatter, hold direct investment interest in some of the companies mentioned in this article.
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