State psychedelic regulation: Oregon and Colorado taking the lead

States keeping pace with the psychedelic medicine movement have made advancements toward revising regulatory schemes associated with controlled substances. These range from designating the use, possession, non-commercial cultivation, and distribution of psychedelic plants as a low law enforcement priority to legalizing certain psychedelics and treatment centers. States’ recognition of the medical and therapeutic benefits of certain psychedelics can perhaps compare to de-criminalization of cannabis, which has led to most (but not all) states having a regulatory framework for specific permitted uses of cannabis. Other controlled substances, such as ketamine, are also increasingly considered viable alternatives to treat behavioral health conditions and are often also subject to somewhat complex state regulatory schemes.

Oregon and Colorado are leading the nation into new territory through recent decriminalization of psychedelics (including psilocybin – a psychedelic agent derived from mushrooms – and other psychedelic substances) via ballot referenda. Both states’ legislative initiatives recognize the severity of mental health conditions, such as suicidality, addiction, depression, anxiety disorders, and end-of-life psychological distress. These initiatives also note that nationally and internationally recognized medical institutes, as well as extensive and growing bodies of research, have indicated the safety and efficacy of natural medicines, such as psilocybin, to treat these conditions.

Thus, these states saw the need to adopt regulatory frameworks for new, compassionate and effective approaches to natural medicine, including the adoption of rules and regulations for removing criminal penalties, developing and promoting public education and appropriate training, and establishing regulated access by adults 21 years of age and older to natural medicines, including psilocybin services.

Federal law

Federal law generally prohibits the manufacture, distribution, dispensation, and possession of Schedule I substances with few exceptions. Most, if not all, psychedelics are subject to federal and state scheduling mechanisms that designate Schedule I substances illegal.

The US Drug Enforcement Administration (DEA) defines Schedule I drugs, substances, or chemicals as drugs with no currently accepted medical use and a high potential for abuse. According to the DEA, psilocybin is a chemical obtained from certain types of fresh or dried mushrooms (also known as magic mushrooms, mushrooms, or shrooms); the DEA currently classifies psilocybin as a Schedule I controlled substance. Similarly, the DEA currently classifies dimethyltryptamine, ibogaine, and mescaline as Schedule I controlled substances.

Oregon Psilocybin Services Act

On January 1, 2023, Oregon became the first state to legalize the adult use of psilocybin through the passage of the Oregon Psilocybin Services Act, codified at Ore. Rev. Stat. Chap. 475A.

The Oregon Psilocybin Services Act creates a licensure process for manufacturers, service center operators, laboratories, and facilitators for the use, manufacture, delivery, and possession of psilocybin products. Adults over the age of 21 can now consume psilocybin mushrooms in a supervised psilocybin service center. A key component under the law is that a state-certified facilitator must be present during an individual’s consumption; the law does not authorize the retail sale of psilocybin.

Obtaining a license will require an application, fingerprinting, and a land use compatibility statement from the city or county that authorizes the land use. There are also restrictions on individuals having a financial interest in more than one psilocybin product manufacturer or more than five psilocybin service operators, as well as residency requirements for entities, partnerships, and direct owners until January 1, 2025 (ie, more than 50 percent of the shares, membership interests, partnership interests, or other ownership interests of the entity are held, directly or indirectly, by one or more individuals who have been residents of Oregon for two or more years).

Aside from licensure, this new law sets up a regulatory framework in Oregon for the following issues, among others, surrounding the use of psilocybin:

• provision of psilocybin services
• disciplinary actions related to psilocybin-licensed individuals and entities
• psilocybin related employees and other workers
• a psilocybin control and regulation fund
• prohibited conduct related to psilocybin
• civil and criminal enforcement, regulation by cities and counties of psilocybin products
• powers and duties of state agencies and officers and governor with respect to psilocybin
• testing of psilocybin products
• packaging, labeling and concentration of psilocybin products
• taxation related to psilocybin products
• authority of cities and counties to prohibit establishment of psilocybin-related businesses.

Oregon has adopted administrative rules to implement the Oregon Psilocybin Services Act, which may be found at Or. Admin. R. 333-333-1010 through 333-333-8260. The Oregon Health Authority, Prevention and Wellness, Public Health Division has an Oregon Psilocybin Services Section with licensure information, resources, training programs, and other information; applications are currently being accepted.

Colorado Natural Medicine Health Act of 2022

Colorado similarly legalized the use of psilocybin under a regulatory framework through the passage of the Natural Medicine Health Act of 2022 in November 2022, which will be codified at Colo. Rev. Stat. § 12-170 et seq. The Colorado law defines the term “natural medicine” as including the following substances in any form: dimethyltryptamine; ibogaine; mescaline (excluding peyote); psilocybin; or psilocyn. The law also limits the term “natural medicine” to only include psilocybin and psilocyn until June 1, 2026. After June 1, 2026, if recommended by the newly established Natural Medicine Advisory Board, the Colorado Department of Regulatory Agencies (DORA) may add one or more of the following substances to the term “natural medicine”: dimethyltryptamine; ibogaine; and mescaline (excluding peyote).

This law also establishes a Natural Medicine Access Program, which regulates the manufacture, cultivation, testing, storage, transfer, transport, delivery, sale, and purchase of natural medicines by and between healing centers and other permitted entities and the provision of natural medicine services to participants.

The Colorado law addresses the following issues related to the Natural Medicine Access Program:

• ensuring the program is equitable and inclusive
• developing and promoting accurate public education campaigns
• studying and delivering recommendations to the legislature
• collecting and annually publishing data on the implementation and outcomes of the program
• establishing a Natural Medicine Advisory Board and a Regulated Natural Medicine Access Program Fund
• providing guidelines for localities and protections regarding natural medicine
• personal use of natural medicine and personal use penalties
• limitations related to natural medicine.

DORA has until January 1, 2024, to adopt rules to establish the qualifications, education, and training requirements that facilitators must meet prior to providing natural medicine services and to approve any required training programs; similarly, DORA has until September 30, 2024, to adopt rules necessary to implement the regulated Natural Medicine Access Program and begin to accept applications for licensure for facilitators and healing centers.

Stay tuned

Although psilocybin and other psychedelics remain federally prohibited drugs, the legalization in Oregon and Colorado may prompt the same type of enforcement discretion in states that already have legalized cannabis. However, both Oregon and Colorado have explicitly limited the construction of these laws so that no one is exempt from a federal law or enforcement of a federal law. Ore. Rev. Stat. § 475A-215(7); Colorado Proposition 122, Section 1 (to be codified at Colo. Rev. Stat. § 12-170-111(k)).

It is unclear how the federal government will tolerate this expanding area of state regulation for psychedelics through enforcement actions or other legislative action, but licensees in both states should carefully review the licensure requirements and general regulatory schemes to ensure compliance with state law.

Further, while these new legal regimes may pave a path for more widespread legalization, the new laws are complex and multifaceted. Many other states, including Washington, California, Maryland, New Jersey, New York and Utah, have begun taking steps to explore legal usage of psilocybin as well, including through task forces and research funding. If and when other states follow Oregon and Colorado, it will likely be through similar highly regulated schemes. For now, attention is on Oregon and Colorado to see whether their new regulatory structures will prove successful.