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December 20, 2023

Rescheduling Psilocybin

The Path to FDA Approval of Magic Mushrooms

By Genna Walsh



Psilocybin, also known as “magic mushrooms,” is currently classified by federal law as a Schedule I drug under the Controlled Substances Act (CSA) enacted by Congress in 1970. The federal drug policy regulates “the manufacture, distribution, dispensing, importation or exportation of any controlled substance.” According to the Drug Enforcement Administration (DEA), the federal classification means psilocybin has “a high potential for abuse, no currently accepted medical use in treatment in the U.S., and there is a lack of accepted safety for use under medical supervision.” In other words, physicians and licensed healthcare providers are prohibited access to psilocybin.

However, throughout the United States, psilocybin has gained significant recognition for its potential healing benefits when used in a therapeutic setting. The Johns Hopkins Center for Psychedelic & Consciousness Research is the leading institution for studies that focus on the effectiveness of psilocybin as a treatment for depression, anxiety, obsessive compulsive disorder, post-traumatic stress disorder (PTSD), Alzheimer’s disease, post-treatment Lyme disease, anorexia nervosa, and addictions to opioids, alcohol, and nicotine, to name a few.

The DEA classifies drugs into five schedules depending on the accepted medical use and the drug’s potential for abuse or dependency. The abuse rate is a significant factor in determining the schedule of the drug. Schedule I drugs are federally prohibited and defined as having the highest potential for abuse. Schedules II, III, IV, and V have fewer categorical restrictions to obtain limited access, with V having the fewest, representing the lowest potential for abuse. Research has shown that psilocybin has a very low potential for abuse and dependency. In 2018, the Food and Drug Administration (FDA) designated psilocybin as a breakthrough therapy, recognizing the drug’s therapeutic potential in order to streamline and fast-track the path from research to approval, a “process designed to expedite the development and review of drugs that are intended to treat a serious condition.” In recognition of psychedelics gaining popularity by drug developers, the FDA recently published the first draft guidance highlighting unique recommendations “for general considerations to sponsors developing psychedelic drugs for treatment of medical conditions.” Despite the developments, psilocybin remains unapproved by the FDA, and therefore, the public is prohibited access under federal law.

This article examines the challenges to rescheduling psilocybin from a Schedule I to a Schedule II drug by exploring the legal pathways to reschedule, detailing the FDA’s drug development process, summarizing DEA regulations for a Schedule I drug, analyzing psilocybin’s current drug status, implications arising under FDA approval, and finally discussing international rescheduling success. 


Legal Pathways to Reschedule

Generally, there are three legal pathways to reschedule a controlled substance. The first path is by legislative process, meaning Congress holds the express power under the U.S. Constitution to propose bills and amendments to federal acts by either presidential approval or by a two-thirds majority vote in both the House of Representatives and the Senate. For instance, amending psilocybin’s status from a Schedule I to a Schedule II controlled substance requires congressional support in redefining and clarifying the meaning of “high potential for abuse.” The second path is administrative, meaning the Attorney General is delegated the federal authority pursuant to rulemaking procedures to “schedule, transfer or remove substances” following proceedings initiated by the DEA, Department of Health and Human Services (HHS), or by a qualified petitioner under the CSA. This path requires the FDA’s assistance for scientific and medical evaluation in accordance with the drug development process. The third path is by judicial procedure and requires filing a lawsuit in court to compel the DEA to reschedule psilocybin. Currently in the 9th Circuit Court of Appeals, AIMS v. DEA challenged the DEA’s response to a physician seeking guidance to administer psilocybin and accommodate access to terminally ill patients under the protections afforded by the 2018 Federal Right to Try Act (RTT). The DEA responded with available drug exemptions governed by the CSA and indicated that RTT did not create any additional exemptions for access to psilocybin. The court dismissed the case for administrative reasons because the DEA’s response “was not a final decision of the Attorney General” and thus not ready for judicial review. The petitioner immediately filed a request for final agency determination to waive or exempt them from DEA registration requirements and additionally filed a petition to reschedule psilocybin. Both claims were denied, which opened the door for the petitioner to appeal to the federal court on the merits. The Ninth Circuit granted the petition to “remand the DEA to clarify its pathway for denying Aggarwal’s petition or reevaluate Aggarwal’s petition on an open record.”

FDA's Drug Development Process

The FDA is the federal agency responsible for regulating and protecting the public health by ensuring the safety and efficacy of drugs. Pursuant to federal law, the FDA has developed the legal framework to obtain regulatory approval by completing a five-step drug development process. The purpose of the FDA’s Center for Drug Evaluation and Research (CDER) is to evaluate new drugs before they can be sold on the open market. Drug developers that intend to sell their drug in the U.S. are required to “send CDER evidence from tests to prove the drug is safe and effective for its intended use.” Therefore, in order for the drug to be approved for sale, the FDA requires the “drug’s health benefits outweigh its known and potential risks.”

Step One: Discovery and Development

At this early stage in testing, researchers gather information related to the drug development. This includes the method of absorption, the manner in which the compound is distributed and metabolized, the potential benefits, the best dosage, the best method of administration, adverse side effects (referred to as toxicity), effects based on different test subjects related to gender, race or ethnicity, interactions with other drugs and treatments, and its effectiveness as compared with other similar drugs.

Step Two: Preclinical Research

Before researchers can test a new drug on humans, they must first gather information on the drug’s potential for toxicity. There are two categories for this type of preclinical research; in vitro and in vivo. The FDA requires standards of Good Laboratory Practices (GLP) setting the minimum requirements for study conduct, personnel, facilities, equipment, written protocols, operating procedures, study reports, and quality assurance to assure safety regulations. The purpose of this step is to provide detailed information on dosing and toxicity levels in order for researchers to review their findings and determine whether the drug is to be considered reasonably safe to be tested on human subjects.

Step Three: Clinical Research

Before drug developers are permitted to begin clinical research, or studies and trials performed on humans, they are required to design the clinical study, set goals and objectives to accomplish in each clinical research phase, and begin the Investigational New Drug (IND) process. The purpose of the clinical trial is to provide information related to the drug’s efficacy and safety in order to answer specific questions about the drug’s protocol, or study plan, that is developed by the researcher or manufacturer. Before research may commence, the IND application must be submitted to the FDA. The application requires animal study data, toxicity data, manufacturing information, clinical protocols for studies to be conducted, prior human research data, and information about the drug developer. The IND may contain additional requirements for an expanded access submission to include a risk evaluation and mitigation strategy (REMS) when the drug’s intended use is to treat patients where “there is no comparable or satisfactory alternative therapy to treat the patient’s disease or condition.” Once the application is submitted, the FDA team has 30 days to review and respond either with an approval to proceed with the clinical trial or to hold, delay, or stop the investigation.

Psychedelic Drugs: Considerations for Clinical Investigations

In recognition of growing interest in clinical trials involving psychedelic drugs furthering the research for treatment of medical conditions, the FDA published non-binding draft guidance proposing unique industry recommendations for drug developers. The guidance defines psychedelics to include psilocybin, lysergic acid diethylamide (LSD), and methylenedioxymethamphetamine (MDMA). Psychedelic drugs have the same evidentiary standards as all other drugs in development, however due to “alterations in consciousness that can last for several hours” after a single dose, drug developers are presented with unique psychological and behavioral components to consider when designing clinical trials. Subjects who receive psychedelic drugs may remain in a vulnerable state for up to 12 hours and therefore require additional safety observations to prevent unreasonable and significant risk of illness or injury. The purpose of the FDA’s guidance is to support the ethical conduct, integrity, and reliability of the clinical trials.

Step Four: FDA Drug Review

When the drug developer has data from two large controlled clinical trials and evidence that the “drug is safe and effective for its intended use,” they are required to submit their findings and may file an application to market the drug. The FDA review team will review the New Drug Application (NDA) and make a determination to approve or deny the drug. The NDA submission requires data and analysis acquired from preclinical research, all phases of the clinical trials, and information related to proposed labeling, safety updates, drug abuse information, patent information, any data from studies held outside of the U.S., review board compliance information, and directions for use.

Under federal law, the FDA is required to index and inform the DEA when an NDA submission appears to have a potential for abuse. According to the CSA, an abuse potential is defined as “any drug having a stimulant, depressant, or hallucinogenic effect on the central nervous system.” Additionally, once the FDA determines drug approval, the FDA is required to inform the DEA of a scheduling proposal and recommendation. The DEA and HHS will determine whether additional controls “are necessary to protect the public health and safety” or in the alternative, will transmit a notice of qualified acceptance to “add, transfer or remove” the drug to the appropriate schedule. The Attorney General is required to issue an interim rule controlling the drug no later than 90 days after receiving notification of the NDA approval or the index related to the potential for abuse. The interim rule is effective immediately and permits the opportunity for public comment and hearing. If there is no objection, the Attorney General will issue a final rule for drug scheduling.

Step Five: FDA Post-Market Drug Safety Monitoring

The FDA has post-market safety assessment tools in place to continue to review a drug’s efficacy and safety. Drug developers are required to submit supplemental applications for any modifications made to the original NDA. If drug developers seek to adapt the original drug formulation to a new strength, dosage, or form of administration, they are required to submit a new IND.

DEA Regulations for a Schedule I Drug

The DEA is the federal agency whose mission is “to prevent, detect, and investigate the diversion of controlled substances from legitimate sources and to ensure an adequate supply for legitimate medical, commercial, and scientific needs.” The DEA safeguards the controlled substance laws and regulations under the CSA. Any person who engages in activities related to controlled substances, such as manufacturing, distributing, or research, is subject to additional procedural regulations and is required to register with the DEA to obtain a Certificate of Registration, so long as the registration is consistent with furthering the public interest. The license granted by the DEA’s Diversion Control Division grants the federal authority to handle a Schedule I controlled substance and additionally, must be in accordance with state and local law. Therefore, it is unlawful for “any person knowingly or intentionally to manufacture, distribute, or dispense, or possess a controlled substance” unless otherwise authorized. Any person not in compliance is subject to imprisonment, fines, and property forfeiture depending on the violation.

Pursuant to the CSA, the Attorney General is delegated the federal authority to initiate proceedings to “add, transfer or remove” a drug from an appropriate schedule after receiving a proposal for scheduling supported by substantial evidence. Federal law requires the Attorney General to consider determinative factors for each substance that is proposed for control, transfer, or removal. Because the CSA’s definition of Schedule I controlled substances states in part that they have “no currently accepted medical use in treatment in the U.S.,” substances listed in that schedule may not be prescribed, administered, or dispensed for medical use. In contrast, the CSA defines Schedule II controlled substances as having “a high potential for abuse, a currently accepted medical use in treatment in the U.S. or a currently accepted medical use with severe restrictions, and abuse of the substance may lead to severe psychological or physical dependence.” Accordingly, Schedule II controlled substances have a categorically restricted accepted medical use, which permits a narrow exception for the substance to be prescribed, administered, or dispensed. The key factor to transferring psilocybin to a Schedule II controlled substance turns on whether researchers and drug developers will be able to produce findings that show an accepted medical use for psilocybin by virtue of the FDA’s legal framework and drug development process.

Psilocybin's Current Drug Status

Although studies have shown that psilocybin has a very low potential for abuse, the drug remains narrowly classified as a Schedule I drug. The federal prohibition is grounded in the inherent hallucinogenic effects psilocybin creates when activating serotonin receptors in the brain. In other words, the healing effects attributed to psilocybin are the very essence of its classification and prohibition.

Despite the barriers in regulations governed by the FDA and DEA, researchers and drug developers continue to study psilocybin. In 2018, the FDA designated psilocybin as a breakthrough therapy for drug developer Compass Pathways. The status streamlines the “process designed to expedite the development and review of drugs that are intended to treat a serious condition.” Drugs that receive breakthrough therapy designations are eligible for fast-track features, guidance on drug development, and organizational commitment, as the primary intent is to develop evidence needed to obtain NDA approval as efficiently as possible. Compass Pathways currently has two clinical trials in phase three studying the safety and efficacy of psilocybin in participants with treatment-resistant depression. The estimated study completion dates for the trials are October 2024 and May 2025.

Once psilocybin obtains approval through the FDA and is rescheduled by the DEA, doors may open for market participants to engage in the industry. States like Oregon and Colorado have legalized state-approved models for psilocybin administration. Despite the fact, stakeholders, such as drug developers, medical providers, patients, insurance companies, banks, and lawyers, are unwilling to participate with the federal prohibition in place. Stakeholders are standing by and waiting for psilocybin rescheduling at the federal level to minimize risk in operating a legitimate business.

Implications Arising from FDA Approval

Absent judicial or congressional action, federal approval of psilocybin remains governed by administrative law. Given the legal framework and the interplay between the FDA and DEA, psilocybin will be heavily regulated no matter the outcome. FDA approval and DEA rescheduling to a less restrictive schedule will have implications to existing state regulated models, health insurance coverage, international treaties, and state legislation.

The Oregon Psilocybin Services Act

Oregon is the first state in the U.S. to roll out access to psilocybin under the Oregon Psilocybin Services Act (OPSA) as of January 2, 2023. The Oregon Health Authority (OHA) is the state agency responsible for rulemaking and regulating the OPSA. The OHA promulgated rules and regulations specifically for the OPSA service center model because such centers are neither medical, nor retail. The service center model exists in its own category. First, the licensed premises requires that a services center “may not overlap with a health care facility.” Second, a facilitator or service center is required to provide every client with an informed consent document prior to an administration session in which the client acknowledges and understands “psilocybin services are not a medical or clinical treatment.” Third, the client may “purchase, possess, and consume” psilocybin only at a licensed service center and only under the supervision of a licensed facilitator. Fourth, the service center model expressly prohibits a licensed facilitator to “engage in any conduct that requires additional professional licensure while providing psilocybin services to clients” including “diagnosing and treating physical or mental health conditions.” Meaning, pursuant to Oregon law, a facilitator is prohibited to exercise any privileges they may hold under another state held professional license. Finally, dishonest conduct constitutes, “making representations or claims that psilocybin product has curative or therapeutic effects” and claims are subject to advertising restrictions. The narrow scope of the administrative rules intentionally excludes the OPSA service center model from any medical, healthcare or therapeutic use. Consequently, the legal status of consumers are clients rather than patients.

 If psilocybin is approved for a limited medical use governed by the FDA and DEA, access to psilocybin will no longer be prohibited due to its status as a Schedule I drug. By definition, limited medical use will classify the status of psilocybin as Schedule II, and as a result, will permit a narrow exception for the drug to be prescribed, administered, and dispensed by authorized licensed healthcare providers. The issue is whether the OPSA service center model will be able to co-exist with the federally regulated medical use. FDA approval implicates the state-approved model under Oregon law because there will be an inherent competing interest arising between the two distinguishable models. The regulated healthcare industry will permit state practitioners holding an appropriate license to prescribe psilocybin to eligible patients. In contrast, licensed facilitators operating under the OPSA will continue to be prohibited from engaging in any conduct with the client outside the scope of the facilitator license.

Health Insurance Coverage

It is common practice for health insurance companies to categorically exclude coverage for experimental or investigational new drugs. FDA approval and DEA rescheduling will lower the level of scrutiny the insurance industry applies when qualifying covered drugs and permit pharmacy coverage to include psilocybin prescriptions that meet the requirements for “medically necessary.” Medical insurance is the pooling of risk among the insured, and the marketplace determines the cost of health premiums. Under federal law, the “business of insurance” is subject to the laws and regulations of the state. In Oregon, the OHA administrative rules define “medically necessary” as the required health services to address the insureds “prevention, diagnosis, or treatment of the member’s disease, condition or disorder that results in health impairments or disability.” Psilocybin treats long-term conditions like PTSD and treatment-resistant depression, impairments that may legally categorize individuals with disability status under the Americans with Disabilities Act (ADA). Persons with disability are a protected class of citizens and therefore it is unlawful to discriminate and “hinder a person’s right to fully participate in all aspects of society.” Here, the inherent conflict arises from the ambiguity of the state administrative rules that covered services must be “medically necessary.” However, not all medically necessary services are covered services. The ambiguity in the administrative rules opens the door for insurance companies to exclude new treatments like psilocybin, even though it may be cost-effective for insurance companies to cover psilocybin in efforts to reduce the cost of long-term treatment for the insureds. Additionally, extending insurance coverage to patients with disabilities will assist in preserving state benefits should the patient recover and be able to participate fully again in society. It may be an economic incentive for the insurance companies to consider covering psilocybin once it is rescheduled as a Schedule II drug.

United Nations Convention on Psychotropic Substances

Changes to the legal status of psilocybin as a Schedule I drug will have implications for international drug control treaties and agreements. The 1971 Convention on Psychotropic Substances (CPS) is an international treaty created to control and regulate the production, trade, and use of various psychoactive substances by establishing a framework for member states to collaborate on controlling substances across international borders. The U.S. became a signatory nation and ratified the treaty on April 16, 1980, thereby committing to enforce and safeguard its provisions. FDA and DEA approval of moving psilocybin from Schedule I status to a less restrictive Schedule II status under the CSA, not only requires satisfying federal law but also requires international compliance with protocols requiring controls governed by the CPS. Therefore, any shift in U.S. drug policy will additionally influence global drug policy under the requisite disclosure to justify the transfer of controlled substances from one to another. Article 2 of the treaty provides that if a party to the convention or World Heath Organization (WHO) has information about a substance “that has a capacity to produce central nervous system stimulation” and “results in hallucinations,” that party must notify the Secretary General of the United Nations. Meaning, the drug may require international control or change to a control. The WHO is required to notify the U.S. of information related to rescheduling a drug such as psilocybin, and HHS is required to publish the notice in the Federal Register to provide opportunity for interested parties to submit for comments to be considered in the scientific and medical evaluations of the drug. These requirements comply with rulemaking procedures set forth in the Administrative Procedure Act, promoting public participation and transparency to further safeguard the democratic process. This vehicle permits the public to influence policy domestically and more broadly in the international community. International drug control laws aim to protect public health and safety by regulating the production, distribution, and consumption of drugs. By complying with the CPS, the U.S. continues to foster collaboration between cooperating nations to address and combat the transnational nature of drug trafficking and abuse.

California AB 1021

The state of California is a unique jurisdiction as it is split on psychedelic drug policy, rejecting legislation for state-regulated models and in favor of supporting federal medical exemptions. California prohibits the use and possession of psilocybin pursuant to federal law. This means that it is unlawful to “manufacture, distribute, or dispense, or possess” psilocybin under the CSA. California embraced a conservative approach, vetoing SB 58, a bill to decriminalize possession of certain psychedelics, thus rejecting legislation moving towards a state regulatory system like Oregon or Colorado. Alternatively, on September 30, 2023, Governor Gavin Newsom signed into law AB 1021, which permits licensed healthcare providers to prescribe and administer psilocybin lawfully under federal law “if a substance listed in Schedule I of Section 11054 is excluded from Schedule I of the federal CSA and placed on a schedule other than Schedule I.” In other words, licensed healthcare providers will be able to prescribe and administer drugs rescheduled, like psilocybin, lawfully under state law. The state is recognizing the progress of drug developers seeking a limited approval by the FDA and DEA and promulgating rules in accordance with federal law in advance.

International Rescheduling Success

In February 2023, Australia became the first nation in the world to legalize MDMA to treat PTSD and psilocybin for treatment-resistant depression. The landmark decision acknowledges the lack of options available for patients with treatment-resistant mental health conditions and permits a specific use in a controlled medical setting. The Therapeutic Goods Administration (TGA) is the Australian agency within the Department of Health and Aged Care, that is responsible for regulating the quality, supply and advertising of therapeutic goods. The TGA classifies drugs using the Poisons Standard to promote a uniform scheduling of controlled substances. Drugs range from Schedule 1 to Schedule 10 depending on their safety and toxicity.[GW1]  Progression of the Schedules signify increasingly restrictive regulatory controls. The classification of Schedule 10 means that substance is prohibited and poses danger to health. MDMA and psilocybin were prohibited substances, except for medical and scientific research, in Schedule 9 and have been rescheduled as controlled drugs for a limited use to treat PTSD and treatment-resistant depression in Schedule 8. Similar to the U.S., prohibited substances in Schedule 9 significantly restrict access to clinical trials, and presently, these drugs have not yet been approved for quality, safety, and efficacy. As of July 1, 2023, the rescheduling permits “authorized psychiatrists to access and legally supply a specified unapproved medicine containing these substances to patients under their care for these specific uses.” Prescribing is limited to approved psychiatrists governed by the TGA’s Authorized Prescriber Scheme (APS) and subject to approval by a human research ethics committee. To protect patient vulnerability and safety while under the influence of psychedelic-assisted therapy, the TGA’s APS requires strict controls including specific training protocols and safety standards for licensees to practice. Additionally, Australia became a signatory nation and ratified the CPS international treaty on May 19, 1982. The CPS is an influencing factor to inform the regulation of controlled substances in Australia.

The world is watching as Australia has opened access to psychedelic-assisted therapies to treat common mental health conditions, like PTSD and treatment-resistant depression. The TGA is the equivalent to the FDA in the U.S., and by granting permission for a restricted and limited medical use, MDMA and psilocybin are available to patients seeking care.


According to the Centers for Disease Control and Prevention, more than one in every five adults and youth (ages 13–18) suffer from a mental illness. The U.S. mental health crisis continues to rise, and under the strict federal regulations access to psilocybin remains narrow and unavailable to the populations who are suffering and most at risk. In the same way that Oregon was the first state to open access to psilocybin, Australia is the first nation to green-light psychedelic-assisted therapy.

Efforts to reschedule psilocybin are governed by the interplay of the FDA and DEA’s legal framework. Psilocybin remains classified as a Schedule I drug due to the effects produced by its inherent hallucinogenic properties. However, in recognition of gaining belief in their potential efficacy, the FDA released its first psychedelic drug guidance and considerations for drug developers. Progress towards federal legalization of psilocybin for medical use challenges the longevity of existing state-regulated access. Australia’s green light to approve and legalize the first psychedelic-assisted therapy for patients suffering from PTSD and treatment-resistant depression will be observed worldwide, influencing global drug policy towards psychedelics. Despite the challenges, researchers and drug developers in the U.S. continue on the path to FDA approval of magic mushrooms.

    Genna Walsh, J.D. Anticipated 2024

    Willamette University College of Law, Salem, OR

    Genna Walsh is a third-year law student at Willamette University College of Law in Salem, OR, specializing in the Health and Business Law Certificate programs. She is planning to practice as an emerging markets attorney focusing on psychedelics, business, health, and real estate law. Ms. Walsh is also a Realtor® in California representing buyers, sellers, landlords and tenants in residential and commercial transactions since 2014. She can be reached at [email protected].

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