Crypto and psychedelics: Clarifying regulations could help industries grow

This year, investors are watching for big spikes in biotech companies working with psychedelics, especially as the once-controversial compounds return to the spotlight touting mental health benefits — and uniting lawmakers at the United States Capitol across party lines. 

The category’s future could make big legal gains in 2023, but due to the American government’s built-in checks and balances, even a Congress in agreement can’t shape drug policy alone.

In May 2022, New Jersey Democratic Senator Cory Booker and Hawaii Democratic Senator Brian Schatz co-published a letter imploring the National Institutes of Health and the Food and Drug Administration (FDA) to study the therapeutic use of psychedelics. By the end of the summer, Republican Representatives Matt Gaetz of Florida and Dan Crenshaw of Texas had also committed their support to the study of psychedelics.

By 2012, the FDA had already created the “Breakthrough Therapy Designation” (BTD), enabling researchers to administer trials of otherwise illegal drugs suspected to offer unexplored medical benefits. MDMA received its first BTD designation in 2017 and psilocybin in 2018. Oregon now allows psychotherapists to treat patients with psilocybin.

As lawmakers on either side of the aisle argue about psychedelics on the federal level — using their power to earmark funds for research — the persistent, unlikely bipartisan union is inspiring increasingly bullish sentiments among psychedelics firms and their investors.

Psychedelics in Congress

Don’t chalk it up to the “Age of Aquarius,” though. Aside from the potential healing benefits, it is support for veterans that drives cooperation around these drugs.

In July 2022, Representative Alexandria Ocasio-Cortez offered an amendment to the 2023 National Defense Authorization Act (NDAA) that would require the Department of Defense to study psilocybin and MDMA, alongside cannabis, as alternatives for combat who have post-traumatic stress disorder, at least 6,000 of whom took their own lives in 2022 alone.

Ocasio-Cortez introducing the amendments before Congress. Source: C-SPAN

Navy veteran and House Representative Dan Crenshaw offered a nearly identical amendment to the NDAA, with his focus on the psychedelics ibogaine and 5-MeO-DMT instead. “They are, I would argue, kind of collaborative amendments in a way,” Ocasio-Cortez told Bloomberg, confirming her office had communicated with Crenshaw’s.

Crenshaw had previously voiced support for MDMA research at an August 2021 panel with Rick Doblin, the executive director at Multidisciplinary Association for Psychedelic Studies (MAPS), and Jon Lubecky, a veteran who’s benefitted from MDMA therapy.

MAPS was the first drug company to secure a BTD for MDMA, with the Bitcoin (BTC)-rich Pineapple Fund donating $5 million and helping raise $4 million more to support MAPS’ $26 million push. Meanwhile, Crenshaw voted against the psychedelics bills proposed by Ocasio-Cortez in 2019 and four days after his 2021 panel appearance.

When Crenshaw and Ocasio-Cortez joined forces for their collaborative amendments last summer, both amendments were passed by voice vote shortly after being presented. Lubecky said, “If AOC [Ocasio-Cortez] and Crenshaw can agree, it’s hard to fight against it.” The NDAA has passed the house and is at the debate stage in the Senate.

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Representative Matt Gaetz, who was serving on the House Armed Services Committee at the time, also presented an NDAA amendment identical to Ocasio-Cortez’s, which was silently shot down.

In November 2022, California Representative Lou Correa and Michigan Representative Jack Bergman upped the ante by forming the Congressional Psychedelics Advancing Clinical Treatments (PACT) caucus. PACT is a bipartisan think tank that will explore “how we as Congress can support further research into clinical applications,” Correa told Cointelegraph. PACT will not advocate for decriminalization.

“During my time in Sacramento, I met veterans who were calling for access to cannabis instead of being prescribed opioids to treat their visible and invisible wounds from the battlefield,” Correa recalled, adding:

“In my time working on cannabis, I’ve seen public opinion change dramatically as there is more and more research. With the promising, but still extremely limited research into clinical applications for psychedelics, this feels like a natural next step.”

That same month, Senators Booker and Rand Paul filed the Breakthrough Therapies Act, which would amend Nixon’s Controlled Substances Act for the first time since it was passed in 1970 by asking the Drug Enforcement Administration (DEA) to reclassify current and future drugs the FDA has endowed with Breakthrough Therapy Designation from Schedule I to Schedule II.

The move intends to “streamline the registration process for breakthrough therapies currently restricted by outdated drug classifications,” Paul told Cointelegraph, adding that it will “make it easier for researchers to conduct studies that can lead to breakthrough therapies to treat patients battling serious and life-threatening conditions.”

Medical leaders

Dr. Rachel Yehuda has studied post-traumatic stress disorder (PTSD) for over 35 years as a researcher with the Mount Sinai-affiliated James J. Peters VA Medical Center. Since 2019, she has studied psychedelics’ potential in treating veterans suffering from the condition, even as MDMA and psilocybin remain Schedule I substances. In 2018, Yehuda met Doblin at Burning Man — just after the FDA granted MDMA with BTD. Other drug companies, including the Peter Thiel-backed Compass Pathways and the Usona Institute, have received a BTD since.

“What bothered me when I first heard about [psychedelic] treatment was not only that a psychedelic was being used, which made me gasp a little, but that there was a claim that one session and there’s a dramatic difference,” Yehuda told Cointelegraph, adding:

“I’ve heard a lot of people make a promise of a quick recovery from PTSD. It irked me a bit because PTSD is such a difficult condition to treat, particularly in combat veterans.”

Doblin, however, invited Yehuda to attend a week-long training in Israel where clinicians watched and discussed footage of MDMA treatments transpiring. “The people on the screen really did remind me of veterans at the VA,” she continued. “They looked like them; they talked like them; they had similar issues — especially the moral injury and a lot of the things that make PTSD so difficult to treat. I said to Rick Doblin, ‘why aren’t you doing this at the VA?’”

Therapists Marcela Ot’alora and Bruce Poulter demonstrate guided therapy with MDMA in a reenactment. Source: NPR

There was no protocol in place with the Department of Veterans Affairs (VA) to carry out such treatments with the safety of all parties ensured. It took a substantial effort, but Yehuda utilized her expertise and position to create a protocol. Now, she’s conducting a study, administering MDMA to 60 veterans over three eight-hour guided therapy sessions, with pre and post-care.

Further critics

Ross Ellenhorn and Dimitri Mugianis, two experts who co-founded the psychedelic retreat Cardera, recently pointed out that traditionally conservative entities like Thiel and the Mercer Foundation have also invested in psychedelics, bolstering bipartisan support for their research.

“Some researchers dream of finding a scientific basis for the hypothesis that psychedelics might help end intractable political conflict,” Ellenhorn and Mugianis wrote, wondering if this newfound coalition could be as benign as it seems. “Psychedelics can certainly increase openness — but this can be openness to Nazism, eco-fascism or UFO cults as well as to peace and love.”

Bioethics experts Arthur Caplan and Kenneth Moch have also asked if the Breakthrough Therapies Act can resolve delays in researching breakthrough therapies and if it still makes sense for the FDA and DEA to co-manage substance schedules.

“Could the FDA itself take on the oversight work to review how a Schedule I experimental medicine is being utilized and access is being controlled in a clinical experiment, or must the DEA provide a second level of review as historically has been the norm when it comes to Schedule I psychoactive drugs?” the duo asked. “We think the former is possible.”

“The only long-term solution,” Ellenhorn and Mugianis continued, “is to directly address and fix the regulatory complexity that increases the cost and delays the timeline for access to potentially beneficial therapies.”

It’s worth noting that psychedelics alone can’t eradicate depression, anxiety and trauma since the drugs don’t directly resolve those conditions’ causes.

The Center for the Science of Psychedelics at the University of California, Berkeley, emphasizes that despite more and more states legalizing psychedelics, these drugs “remain illegal federally, so the impact of new state laws will depend upon the federal government declining to prosecute cases involving these substances.” Comanche Native Americans and religious leaders from Brazil have led ongoing battles against the Senate — still a stalling ground even for cannabis reform — seeking legal exemptions for the use of psychedelics under religious acceptance for over a century.

Regulatory clarity is good for markets

With increasing legislation and attention from a diverse range of lawmakers and experts, psychedelics could receive regulatory clarity to help the market expand further.

Ballooning attention, funding and social acceptance since 2018 have helped psychedelic stocks rise rapidly, with some volatility. Though the whole sector is expected to grow at a compound annual growth rate of 11.5% between 2021 and 2026, topping $6.4 billion by 2028, the hype appeared to hit its plateau in January 2021 before sliding to unforeseen lows starting in April 2022.

In this regard, the arc of psychedelics illustrated from a financial perspective echoes the historical volatility of cryptocurrency markets, particularly in reaction to inconsistent legal controls based on decades-old regulations for their respective sectors. Dips in psychedelics stocks relate to projections for when the waiting ends. Crypto has been moving since the start.

Still, many in the crypto industry have claimed that legislation will help it grow and that 2023 will be the year that firms finally get a solid set of ground rules from lawmakers.

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The fate of psychedelics, on the whole, however, is more than a tool for political or profit gains. Access to their healing power has a bearing on real people’s circumstances.

“A lot of public health issues have become pretty controversial or polarized,” Yehuda said. “How we respect the need for our veterans to heal following serving our country is something we can all get behind. And that’s just the beginning, the tip of the iceberg, because there’s so many people that can benefit from this. A lot of people have trauma and mental health conditions.”

“We’re having a moment,” she concluded. “To make that moment last, we want to have a pathway of doing really careful work — if these treatments are even half as good as we think they are, it’s gonna be a significant advance for veteran healthcare and for the healthcare of our society.”

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