August 2, 2023

Advancing Equitable Psychedelic Policy

Like cannabis, psychedelic drugs have a long history of recreational, spiritual, and therapeutic use. Despite decades of federal prohibition of both cannabis and psychedelics, cannabis markets have now taken the United States by storm; Thirty-eight states have legalized cannabis for medical use, and twenty-three states have recreational adult-use programs.

The psychedelics industry is now experiencing its own renaissance, with the U.S. Food and Drug Administration (“FDA”) expected to approve MDMA and psilocybin for therapeutic use by 2024. At the state level, Oregon and Colorado recently created regulatory programs to govern the adult-use of specific psychedelic drugs, and California may soon follow suit. Cities across the county have joined the movement by locally decriminalizing the personal possession and use of certain psychedelic drugs.

Developing a comprehensive regulatory framework to govern the cultivation and manufacture, sale, and consumption of psychedelic drugs is crucial to ensure safe and equitable access. Policies will have a significant impact on individual psychedelic consumers and will dictate who is able to succeed in the industry. While cannabis and psychedelics maintain distinct qualities, there are several useful themes from the cannabis industry’s legalization movement that are important for psychedelic policy drafters to consider.

  1. Advancing Social Justice & Equitable Policy

Like cannabis, psychedelics have been subject to unjust criminalization laws that have harmed communities—particularly communities of color—for decades. While social equity programs are important, and often popular, components of cannabis regulatory regimes, they have had a bumpy ride thus far trying to truly uplift those individuals and families who have been harmed by the War on Drugs. In fact, many legacy cannabis operators and business people truly passionate about the plant have been forced out of the market by larger, more competitive, and better funded operators.

As states, and ultimately the federal government, develop laws that govern the commercial sale of psychedelics and related services, it is imperative that regulations look beyond the bounds of current models of social equity and have measures in place to uplift legacy healers and smaller operators in the emerging regulated market. It is especially important that policies reflect the interests of indigenous groups who have stewarded certain psychedelic medicines for thousands of years.

  1. Creating an Affordable Legal Market

Cannabis businesses are disproportionately taxed at the federal, state and local level, which has created unnecessarily burdensome costs for entrepreneurs and consumers alike and has encouraged the illicit market to thrive. Overregulation and overtaxation policies have made it extremely difficult for smaller operators to thrive in the ultra competitive market, while simultaneously encouraging both operators and consumers to participate in the illicit market, where costs are lower. It is essential to draft psychedelic policies in a manner that protects the psychedelic market from burdensome tax requirements coming from multiple jurisdictions, as cannabis has befallen to.

This is especially important given that psychedelics will largely be sold and administered to people in need and in a therapeutic context, where accessibility is paramount. While insurance coverage may become a reality upon federal legalization, state level adult-use programs are grappling with how to provide affordable services now. For example, in Oregon, a single psilocybin session currently costs up to $3,500.

Inflated costs, in the cannabis and psychedelics industries alike, is partially driven by IRS Tax Code Section 280e (“280e”), which is a federal law. Under 280e, businesses that deal with psychedelics and cannabis are not eligible for tax deductions and benefits that other types of businesses are enabled to enjoy. If and when the FDA approves certain psychedelics, businesses that deal with the approved drugs will only then no longer be financially burdened by 280e.

Cannabis and Psychedelics Attorneys

Having ushered cannabis entrepreneurs through prohibition into the legalized commercial market, Manzuri Law is excited to see the psychedelics industry come above ground. Our team excels at providing tailored legal advice to help our clients thrive in an ever changing regulatory environment. If you have questions about the emerging psychedelics industry, don’t hesitate to reach out to our experienced California cannabis attorneys.

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