Canada’s Psychedelic Future: a guide to the evolving legal and regulatory landscape and what’s next – Lexpert

What factors should businesses account for when investing in the production, provision or sale of psychedelics or related services? What are the risks and potential benefits of entering this area now?

In addition to the start-up risks facing psychedelics companies as early-stage pre-revenue companies or as companies with modest revenues, since psychedelics are, and are likely to remain, highly regulated substances, certainty in the application and design of legal and regulatory regimes in which the business operates should be at the forefront of considerations of businesses in the psychedelics industry. This may not be true for all of the activities of a psychedelics business, but in our view should be for a majority of the operations of those businesses. For example, jurisdictions that have legal and regulatory regimes that are in constant flux or that have inequitable or unpredictable results limit the ability of psychedelics companies to, among other things, operate effectively, gain investor confidence, access capital and banking, develop products or deliver services in a timely and cost-effective manner.

In addition, one of the key risks facing many psychedelics is the risk of getting lost in the crowd. In the past 12 months a significant number of psychedelics companies have completed go public transactions and raised capital. Many more have raised substantial amounts of capital and have grown to a significant size, but remain private. Many of these existing companies have similar business plans so a company finding its niche in the market has become that much more challenging. That being said, the psychedelics industry is experiencing a renaissance in the investment community, the medical or health and wellness community and the general public, with substantial areas of opportunity for enterprising psychedelics companies that want to make a meaningful difference through the advancement of ground-breaking therapies.

How would you advise clients in this area to limit their exposure to liability and potential litigation? Do clients in the psychedelics space require protection against multiple types of liability?

In addition to ordinary course business risks, psychedelics companies face risks associated with operating in a nascent, rapidly evolving, yet highly regulated industry. In our experience, these factors, and others, require companies in the psychedelics industry to professionalize their management teams and establish sophisticated processes and views on risk at a much earlier stage that companies operating in other industries. By taking these actions at an earlier stage, psychedelics companies can formulate strategies to identify, weigh and manage risk, to make informed decisions on risk versus reward for the opportunities they consider. As the psychedelics industry continues to develop so does the insurance industry supporting these companies, with an increasing range of insurance products becoming rapidly becoming available.

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Canada's Psychedelic Future: a guide to the evolving legal and regulatory landscape and what's next - Lexpert