Oregon Psilocybin Business Issues: Part 4

Welcome to the fourth installment in this series surveying business and regulatory issues in the Oregon psilocybin program. Today I’ll cover access to professional service providers.

Service providers and the Oregon psilocybin industry

I’ve mentioned before that Oregon psilocybin shares many parallels with what came before with cannabis. In the early days of cannabis, it was difficult for businesses to access professional services. Lawyers were hard to find; accountants were harder; realtors less so; insurance brokers more so. There were various reasons for all of this, even after marijuana was legalized for adult use in Oregon. But all of those reasons arose directly or indirectly from the Schedule I status of “marihuana” under federal law.

Psilocybin is also a Schedule I drug. Because we blazed a trail with cannabis, things with outside service providers should be a bit easier this time around. It’s worth noting that in addition to everyone listed below, consultants will emerge. That will be a “buyer beware” situation as it always was with cannabis; though we aren’t saying consultants never add value.

Oregon psilocybin lawyers

Most attorneys working in Oregon cannabis operated in the criminal defense lane until around 2015. A few smaller firms ventured in with adult use legalization, and larger firms shuffled in a few years later. Here are some problems that arose from the federal illegality issue:

  • The Oregon Rules of Professional Conduct (RPC) were unclear until after Measure 91 passed on whether Oregon lawyers could advise cannabis businesses.
  • Law firms were nervous about “aiding and abetting” liability, as well as exposure to RICO and other lawsuits.
  • Law firms were unsure if professional liability insurance would cover claims related to cannabis clients.
  • Law firms were nervous about losing their bank accounts due to cash deposits and servicing cannabis businesses.
  • Some professional stigma existed around working with cannabis businesses.

It will be easier for licensed psilocybin businesses to access legal services to start. Several of the boutique firms that specialize in cannabis are enthusiastically marketing psilocybin advisory services in Oregon. The larger firms have been pretty quiet, but they are likely to come in after the path is cleared a bit.

One thing that would help expedite lawyer access (for better or worse) would be further amendment to the RPC. We gave an overview of that topic here. My personal take is that it won’t be an issue. That’s based on my reading of Rule 1.2(c) and also the fact that the Oregon State Bar Association already let us rename the Cannabis Law Section: it’s now the Cannabis and Psychedelics Law Section. Lawyers will be available.

Oregon psilocybin accountants

Accountants were a little slower to take to cannabis than attorneys. In March 2015, however, the Oregon Board of Accountancy released guidance stating that it would not take action against a CPA or CPA firm that elects to provide services to a state-legal marijuana business, simply for providing services to that business. However, the guidance also stated that CPAs should consider the “potential risks and uncertainties involved, including but not limited to the continued uncertainty surrounding enforcement of applicable federal drug laws and related provisions of the Internal Revenue Code.” This gave a lot of CPAs pause. Nowadays, though, the industry has plenty of access to accounting professionals.

Psilocybin industry players will have access to CPAs from the start. How do I know this? From talking to Oregon CPAs. These individuals and firms are less vocal about working with the psilocybin industry than lawyers, but we’ve already been puzzling through business structuring ideas with a few of them, and I anticipate reasonable access to tax and accounting services for Oregon psilocybin clients. That’s good news because they’ll definitely need it.

Oregon psilocybin realtors; insurance brokers

Commercial real estate brokers are not going to be an issue whatsoever. They never really were in cannabis, and our early broker conversations regarding psilocybin have been along the lines of “I haven’t really thought a lot about it. But sure!” Competent realtors will educate themselves around program requirements for siting, along with zoning rules of the cities and counties that don’t opt out of the program.

Insurance brokers are a bit more nuanced. I’ve actually covered this one before in the context of insurance products. Here’s the relevant text:

I’m optimistic about insurance. We have been talking with a couple of brokers already. The forecast here is that property and casualty policies will likely be underwritten and available. This means the general liability coverage policies that most small, licensed psilocybin businesses will want should be on offer.

More uncertainty exists with other lines of coverage. I’m told directors and officers policies, as well as product insurance, could be harder. In all categories, it comes down to whether the underwriters themselves can find enough reinsurance to get comfortable wading in.

Court enforcement of psilocybin insurance contracts is an open question. We recently explained how the courts have split on enforcing cannabis insurance contracts in the event of coverage denial. Fortunately, I’m not aware of any bad decisions in the State of Oregon or the Ninth Circuit. From our experience working with cannabis clients making claims, insurers also have been reasonable at paying to begin with. Or, no different than in any other context.

Oregon psilocybin bankers

Probably no banking, at least for a while. Sorry.

Oregon psilocybin training program providers

A brief refresher. The Oregon psilocybin program is set up such that clients will consume psilocybin in service centers, in sessions overseen by licensed “facilitators.” Those facilitators must first be trained in approved Oregon Health Authority (OHA) programs, then licensed by OHA. (We covered draft rules on training here; the OHA page on training curriculum approval is here.)

One of the higher-profile stories swirling around Oregon psilocybin was the recent resignation of Chief Petitioner Tom Eckert from the OHA Psilocybin Advisory Board, related in part to a training company he had founded for service center facilitators. Mr. Eckert will be just one of many operators in this area. On that note, someone recently quipped that:

“I have heard from more people who wish to start a psilocybin training program than a psilocybin service center. It would be like if everyone wanted to start a culinary school and almost no one wanted to start a restaurant.”

Unlike with psilocybin service centers, the training program model could probably be replicated in jurisdictions outside of Oregon right away. Training program providers will also have a captive market with facilitator clients. Because OHA will be a gatekeeper of sorts via the curriculum approval process, this class of industry service provider is different than everyone else discussed above. Still, we expect to see some variance in quality and approach.

Summing up

Outside of banking, the Oregon psilocybin industry won’t have as many challenges with access to professional service providers as the cannabis industry once did– even if we never get a psychedelics Cole Memo or other federal guidance. That’s good news, because state drug programs are always choppy to start. The Oregon psilocybin industry will take all the help it can get.

For earlier posts in this series, check out the following: