Psychedelics and the Law in CanadaFollowing the legalization of cannabis, there has been a renewed interest in psychedelics that has been bolstered by scientific breakthroughs and an informed understanding of the benefits psychedelics have provided in the past. The research and development in this emerging industry has been drawing attention particularly from the capital markets. Companies are recognizing the medical and spiritual properties of psychedelics and their potential to improve mental wellness in today’s environment.For companies and investors alike, it is important to understand Canada’s legal regime prior to contributing to its development. Below, we have outlined what psychedelics are and how they are regulated in Canada. What are Psychedelics?Psychedelics, also known as hallucinogens, are a class of psychoactive substances that produce changes in perception, mood, and cognitive processes. Included in this class of hallucinogens are ayahuasca, psilocybin (magic mushrooms), LSD, and MDMA, which can either be produced naturally or manufactured in laboratories.Companies entering into this space are often focused on clinical testing and treatment, as well as research on these substances and their impact on mental illnesses such as anxiety, depression, post-traumatic stress disorder, and addiction.What is the legal status of Psychedelics in Canada?General OverviewAs the law remains, psychedelics are classified as controlled substances under the Controlled Drugs and Substances Act (the “CDSA”). Controlled substances are drugs that the federal government has categorized as having a higher-than-average potential for abuse or addiction. Under the CDSA, controlled substances and drugs are categorized into schedules. Substances listed under Schedule 1 have the highest potential for abuse and impose higher penalties, followed by substances listed on Schedule 2 and so forth.Most psychedelics are categorized as Schedule 3 controlled substances. This includes ayahuasca, psilocybin, and LSD. MDMA and ketamine are listed under Schedule 1. These substances are generally prohibited unless granted an exemption under Section 56 of the CDSA (“Section 56”) or under the Food and Drug Regulations or the Narcotic Control Regulations. These regulations are significant as they provide guidance on both their legal use and potential licensing to dealers in this space.Under the Food and Drug Regulations, the only non-government persons who are authorized to possess a restricted drug like psychedelics are:a licensed dealer;a qualified investigator who possesses the drug for the purpose of conducting clinical testing or laboratory research in an institution; anda person exempted under Section 56 with respect to the possession of that drug.Section 56 The Minister of Health may grant an exemption pursuant to Section 56 to use a controlled substance if it is necessary for a medical or scientific purpose or is otherwise in the public interest. If Health Canada grants a license under this exemption, Companies will be able to begin research and clinical trials to produce studies and findings in this space.On an individual level, this exemption was successfully relied upon for patients undergoing end-of-life treatments. On August 4, 2020, Patty Hadju, Canada’s Minister of Health, permitted four terminally-ill Canadians to obtain psilocybin to help alleviate anxiety and depression. This exemption has been deemed as marking a shift in the legal landscape and awareness of the potential medical relief of psychedelics. The founder and chair of TheraPsil has seen this decision as a game changer for the industry.Food and Drug Regulations: Buying and Selling PsychedelicsPart J of the Food and Drug Regulations requires authorization from Health Canada in order for controlled substances, such as psychedelics, to be regulated for possession, production, sale, transportation, and import and export for clinical trials or research purposes. Part J is under the authority of the CDSA even though it is provided for under the Food and Drug Regulations.LicensingThere is a specific set of requirements that a licensed dealer and a purchaser must meet and be approved for prior to selling and purchasing psychedelics.In addition to applying for a license pursuant to the Food and Drug Regulations, licensed dealers must abide by security and record-keeping requirements. Additionally, licensed dealers must obtain a permit for each import or export of psychedelics.Selling and Purchasing a Restricted DrugHealth Canada must pre-approve both the sale and the purchase of psychedelics from a licensed dealer to a purchaser. Once both the licensed dealer and the purchaser have been authorized to complete a transaction, then the licensed dealer may provide the controlled substance to the research institution or company to the purpose of research studies and clinical trials.Medical Use and Some Recent ExemptionsKetamine is regulated pursuant to the Narcotic Control Regulations and is already permitted for medical use. There are currently no approved therapeutic products containing MDMA, psilocybin, or LSD available to the general public. Health Canada also approved ayahuasca use for some religious groups in 2017 and 2018 for a limited time, before the exemptions had to be renewed.ConclusionWith the rise of the psychedelics industry in Canada and the potential the substances have for medical development, the current legal regime in Canada is consistently being challenged. Substances that were labelled as having a much higher potential for abuse, such as cannabis, were listed as a Schedule 1 controlled substance and now are regulated for recreational use. Through advocacy, the Section 56 exemption, and the informed understanding of the substance, Canada could be on the brink of a future shift in advancing health care and treatment in a safe and regulated manner.For more information on any of the above, or to connect with one of our lawyers, feel free to contact us at 604-629-5400 or via e-mail at: [email protected]Disclaimer***The above blog post is provided for informational purposes only and has not been tailored to your specific circumstances. This blog post does not constitute legal advice or other professional advice and may not be relied upon as such. ***Controlled Drugs and Substances Act, SC 1996, c 19.  Food and Drug Regulations, CRC, c 870.  Narcotic Control Regulations, CRC, c 1041.