The Road To Psychedelics Legalization, Part 1: Psychedelics vs. Cannabis

  • Psychedelics-based medicine has the potential to revolutionize mental health care as we cope with a worsening Mental Health Crisis
  • While cannabis legalization has encountered serious roadblocks in many jurisdictions, the path to legalization for psychedelic drugs looks much different

The emerging psychedelic drug industry is off to a booming start. In the first full year of public companies in this sector, many psychedelic stocks produced strong investor returns.

Those gains were powered by a combination of exciting clinical research on psychedelic drugs, massive capital flows into the sector, and very strong investor sentiment.
The industry has been rapidly advancing. Media coverage has been positive and plentiful.

One question remains. What about the legalization of these drugs?

The road to legalization

Roughly a half-century ago, psychedelic drugs were heavily criminalized as (supposedly) dangerous drugs with no known medicinal uses. This drug Prohibition was a reaction (over-reaction?) to the 60s cult figure Timothy Leary, and his encouragement to younger people to “tune in, turn on, drop out.”

Drug Prohibition put the brakes on (among other things) scientific research on the potential of psychedelic drugs to treat an assortment of mental health disorders.

Fifty years later, a Mental Health Crisis now spirals out of control globally. Over 1 billion people suffer from stress-related afflictions like depression, anxiety, addiction and PTSD.

Thanks to the COVID pandemic (and related lockdowns), the numbers of people affected by such stress-related conditions are increasing exponentially. Conventional therapies have proven to be woefully inadequate in treating these conditions – which is why we now have a “crisis” in mental health.

In recent years, the doors have creaked open again to medical research on psychedelic drugs.

Clinical testing has been producing spectacular results. Even better, an economic study on psychedelics-assisted therapy (using MDMA for PTSD) shows the potential for enormous cost savings.

But the general population won’t have access to these drugs unless/until they are legalized for medicinal use. This brings us back to the original question: when will these drugs be legalized?

For some investors, the question needs to be framed in even more open-ended terms. Will these drugs be legalized at all?

Those looking toward the cannabis industry for guidance may be apprehensive. While Canada has legalized cannabis nationally for both medicinal and recreational use, few other jurisdictions have gone that far.

The United States remains in obstructionist mode toward cannabis legalization federally as well as in a significant minority of states. The EU (with few exceptions) has stubbornly refused to reform its own archaic cannabis laws.

Is this what the future looks like for the psychedelic drug industry? For several reasons, Psychedelic Stock Watch sees a much different picture regarding the legalization of psychedelic drugs (for medicinal use).

Cannabis legalization vs. psychedelics legalization: apples and oranges

Cannabis is non-toxic and not physically addictive. It has been empirically shown to not only have countless medicinal uses but also numerous health-and-wellness benefits.

In any form of (rational) comparison, cannabis is at least an order of magnitude safer than either alcohol or tobacco.

So why have most Western governments remained stubbornly (and irrationally) opposed to full cannabis legalization? Two factors.
  1. Lack of political will to enact legalization
  2. Strong corporate (Big Pharma) opposition

When it comes to legislating change, the general thinking among politicians is not “how will this help the people?” Rather, the dominant thinking is “what’s in it for me?”

Sadly, after nearly a century of anti-cannabis brainwashing, in most jurisdictions legalizing cannabis offers only a modest political dividend while still carrying some political risk. Not enough to mobilize the politicians out of their customary inertia.

Meanwhile, working squarely against cannabis legalization is Big Pharma.

Cannabis makes people healthy. Big Pharma makes (fat) profits off of sick people. The more sick people, and the sicker they are, the fatter those profits.

Cannabis can be effectively used medicinally for numerous conditions. But the enormous complexity of the plant (and complexity of cannabis medicine) makes effectively patenting cannabis medications highly problematic.

Big Pharma exists for only one purpose: cranking out drug patents to produce enormous revenue streams. For multinational drug companies, legalized cannabis is simply “bad for business”.

Psychedelic drug legalization: needs + incentives

There are important reasons to expect these same dynamics to play out in an opposite manner when it comes to psychedelic drugs.
a)  Many political inducements for legalization
b)  Strong corporate support for psychedelic drugs

Psychedelic Stock Watch has presented the policy arguments in favor of legalizing psychedelic drugs on many occasions.
  1. Over 1 billion people needing treatment
  2. Psychedelic drugs can revolutionize treatment for many of these conditions
  3. Psychedelics-assisted therapies can generate enormous savings in healthcare spending
  4. Mental Health Crisis costs the global economy $1+ trillion per year in lost productivity alone

Those are the sorts of talking points that savvy politicians know can help them score points with voters. Equally important, we see a much friendlier corporate attitude toward the psychedelic drug industry in comparison to cannabis.

As already noted, institutional capital is flooding into this sector: over US$500 million in roughly just the last four months. Accompanying that capital are many high-profile investors – with both Silicon Valley and Wall Street well-represented.

The corporate media can’t find enough nice things to say about psychedelics drugs. In contrast, these same multinational media corporations continue to relentlessly spew anti-cannabis rhetoric.

What about Big Pharma itself?

Multinational drug companies largely abandoned spending on mental health R&D toward the middle of last decade. Spending in this area had dropped off by 70% as of 2016.

Bad timing, given a Mental Health Crisis and a need (and the markets) for new/effective drugs to treat mental health conditions.

Psychedelic drugs show every indication of filling this R&D void – in the nick of time. And there is one very important reason why Big Pharma is much more likely to be favorably inclined toward psychedelic drug development (and commercialization).

Unlike cannabis, most psychedelic drugs are much more amenable to a drug patent system. Translation: much more robust profit potential for pharmaceutical companies in comparison to cannabis.

Would the corporate media still be saying all these nice things about psychedelic drugs if psychedelic drugs were (also) on Big Pharma’s hit-list?

Would Silicon Valley icon Peter Thiel and Wall Street heavyweight Mike Novogratz be betting big on psychedelics if Big Pharma planned on getting in the way?

The biggest ally of psychedelic drugs: the Department of Defense

Even if Big Pharma decided that psychedelics legalization was against its best interests, there are entities who exert influence that dwarfs even that of the multinational drug companies.

Question: who is the world’s largest individual donor to psychedelic drug research?

Answer: the U.S. Department of Defense.

The DoD pledged $27 million for psychedelic drug research. A veterans’ health organization recently steered more funding into psychedelic drug R&D.
The U.S. military is coping with an even more severe Mental Health Crisis. Post-traumatic stress disorder (PTSD) and related mental health conditions have been devastating the ranks of the U.S. military for years – with this attrition steadily worsening.

It’s not like the Department of Defense can afford such a high attrition rate. With 70% of Young Americans deemed unfit for military service, the DoD needs to hang onto all the personnel it manages to recruit.

Our governments need the healthcare treatment gains and healthcare cost savings that psychedelic drug therapy represents. The global economy needs to reduce productivity losses due to mental health.

The general population badly needs access to better treatment options to address the Mental Health Crisis.

The Department of Defense desperately needs access to better treatment options to address its own Mental Health Crisis.

It’s not a question of if psychedelic drugs will be legalized for medicinal use. Only a question of when.

In the concluding installment of this series, we’ll offer some insights on which of these drugs we expect to be first to the finish line in the Road to Legalization.
Cannabis_mushrooms (cover) by Jackie is licensed under


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