Psychedelics and Cannabis: Part 1, Regulatory Déjà Vu

As the world backs away from the failed War on Drugs, a medicinal Renaissance is taking place. Natural substances (and some synthetic drugs) that have long been strictly prohibited are being decriminalized.

First it was cannabis.

The least-psychoactive and (arguably) most benign drug to be criminalized was first to emerge from Prohibition.

Beginning in California in the early 1990’s, voter initiatives to permit the medicinal use of cannabis were passed – first at the local level and then at the state level. Other states followed.

Colorado became the first U.S. state to legalize cannabis for recreational use in 2014. In 2019, Illinois became the first state to legalize the recreational use of cannabis without being mandated by a voter ballot.

Federally, however, the U.S. has remained in its anti-cannabis Twilight Zone.

In Canada, the path to legalization began later but progressed faster. Starting with a successful 2001 court challenge (R. v Parker), cannabis began to be decriminalized at the federal level for medicinal use.

In October 2018, Canada became the first major economy to legalize cannabis nationally for recreational use.

Now psychedelic drugs have started their own journey to decriminalization and (eventual) legalization.

Regulatory déjà vu for psychedelic drugs

Even in the early days of psychedelics decriminalization/legalization, we see a familiar pattern emerging.

At the local level, some U.S. cities have already decriminalized psilocybin for medicinal use. Psilocybin is the psychoactive substance in “magic mushrooms”.

Psilocybin is leading the way in the push for psychedelics decriminalization for two reasons.
 

1. Psilocybin has shown enormous medicinal potential (in several areas) in early clinical studies
2. Psilocybin has very low toxicity and is thus generally safe for human usage

Denver was the first U.S. city to decriminalize psilocybin (May 2019). Oakland and Santa Cruz have followed.

At the state level, in Oregon the decriminalization of psychedelics and legal psilocybin therapy are on the November ballot. In Washington D.C., a ballot for the decriminalization of a range of psychedelics has qualified for November.

We see more déjà vu in Canada.

Once again, Canada has been slower to act in decriminalizing these substances. Once again, regulatory movement is proceeding from the top down.

Federally, Canada’s Health Minister Patty Hadju has granted a medical exemption for the legal use of psilocybin to four terminally-ill cancer patients. It’s the first legal use of psilocybin in Canada since the 1970s.
 
Future decriminalization/legalization of psychedelics

To date, psychedelic drugs have paralleled cannabis in the path to legalization. How strongly will this pattern continue moving forward?

There is every reason to expect that U.S. state and local movement toward the decriminalization and eventual legalization of psychedelics will continue to follow the same pattern as with cannabis.

Similarly, the path to decriminalization/legalization of psychedelic drugs in Canada will likely continue to parallel cannabis. Top-down legal reform, with Canada adopting a (relatively) more progressive attitude toward the legalization of psychedelic drugs for medicinal use.

What about the U.S. federal government?

As the architect and driving force behind the War on Drugs, the federal government has been extremely reluctant to acknowledge its previous failures and stupidity here. The clamor from back-benchers for cannabis reform has been generally ignored by the leadership of both parties.

However, there are several strong arguments that it will be less-obstructionist when it comes to the development and legalization of psychedelic drugs.
 
Psychedelics as the solution for the Mental Health Crisis

As Psychedelic Stock Watch has pointed out in a previous article, mental health disorders are projected to cost the global economy $16 TRILLION in lost productivity between now and 2030. It is a mental health crisis.
 
Mental health epidemics such as depression, addiction and PTSD are steadily worsening – in large part because of the dreadful job that mainstream medicine is doing in treating such disorders. Current treatment options have an abysmal failure rate.

In contrast, early clinical studies on the use of psychedelics for a variety of mental health disorders (including depression/addiction/PTSD) have demonstrated far superior results to conventional treatments.

The global economy couldn’t afford $16 trillion in lost productivity before the eruption of the coronavirus pandemic.

Now COVID-19 has not only crippled much of the global economy, it has significantly increased (in particular) the rates of depression and addiction.

Greater economic costs from mental health problems. Even less capacity to absorb such costs.

The world – including the United States – can’t afford not to pursue the decriminalization/legalization of psychedelic drugs.

Psychedelic drugs for military personnel

Above the need for psychedelic drugs among the general population, military personnel have an especially acute need.

The epidemic of PTSD in the U.S. military is well-known. Roughly 1 in 8 veterans currently suffer from PTSD. Two-thirds of these veterans are not being helped by the existing treatment options of the VA and DoD.
 
Depression and substance abuse are also endemic among U.S. military personnel. Suicide rates have risen for both veterans and active-duty personnel.
 
Under the Trump administration, the U.S. government is engaging in aggressive sabre-rattling on multiple fronts.

The likelihood of the United States starting another major conflict hasn’t been this high since the U.S. invaded Iraq in 2003. Yet the combat-readiness of U.S. troops has never been more in doubt – largely because of the toll from PTSD, depression, and substance abuse.

The U.S. military has an even more desperate need for psychedelic drugs (for strategic reasons) than the general population. And the Defense Department always has the ear of the federal government, regardless of which party occupies the White House.

Psychedelic drugs are Big Pharma-friendly

The U.S. federal government (Republicans and Democrats) was bought-off by Big Pharma long ago. This is why anti-cannabis obstructionism remains so strong at the federal level.

Why does Big Pharma have such an intense hatred toward cannabis? Two crucial reasons.
 
Cannabis was decriminalized (and legalized) based upon large-and-growing bodies of evidence of numerous, potent medicinal benefits.

However, many researchers believe it is the combination of cannabinoids, flavonoids and terpenes in the cannabis plant that produce most of these benefits (“the Entourage Effect”). Big Pharma can’t patent the cannabis plant.

In contrast, psychedelic drugs derive their medicinal effects from discrete psychoactive agents – natural, plant-based psychedelic substances. These can be synthesized and patented. Along with this are existing synthetic psychedelics like LSD and MDMA.
 
All are amenable to drug licensing and patenting. Big Pharma can profit from psychedelic drugs to a much greater degree than would ever be possible with cannabis.

The legalization of psychedelic drugs for recreational use is (at best) a very long-term proposition in most Western nations. However, the legalization of psychedelic drugs for medicinal use is a movement with powerful economic and political drivers behind it.

Saving the economy. Fighting the next war.

For these reasons, it is very likely that – for medicinal use only – psychedelic drugs will face less political and regulatory resistance than we have seen regarding cannabis legalization.

For psychedelics investors, this bodes well over the long term for the commercialization of these drugs.