The Legal Architecture of Psychedelic Therapy: Risks, Responsibilities, and Reimbursement Realities

As the therapeutic potential of psychedelics continues to draw national attention, health care professionals across disciplines are grappling with how to responsibly engage with this rapidly evolving treatment landscape. Once relegated to the periphery of psychiatry, psychedelic compounds are now being reconsidered for their clinical utility in treating a range of complex conditions, including major depressive disorder (MDD), posttraumatic stress disorder (PTSD), and chronic pain. However, the path toward safe, equitable, and compliant access remains complex.

In the webinar “Psychedelics Law 101: Navigating Legal Risks and Building a Compliant Practice,” Jess Gonzalez, JD, a cannabis and trademark attorney at Rudick Law Group, PLLC, and Victoria Cvitanovic, JD, attorney of counsel at Rudick Law Group, PLLC, unpacked the current legal and regulatory frameworks surrounding psychedelic-assisted therapy. Their discussion covered the Controlled Substances Act and state-level reforms, as well as deeper ethical questions around informed consent, disability access, and data privacy. For managed care professionals, these insights provide an essential roadmap for navigating the intersection of law, medicine, and policy in a space where demand is growing faster than infrastructure.1

Understanding the Psychedelic Spectrum: Definitions and Classifications

Cvitanovic emphasized that establishing a clear, operational definition of psychedelics is a critical first step for clinicians and stakeholders engaging with this emerging field. She noted that psychedelics can be defined as psychoactive compounds that induce alterations in perception, mood, and cognition.1

“When I say psychedelic, what am I talking about? I'm talking about a substance that's psychoactive. It may also be called a hallucinogen or a hallucinogenic,” Cvitanovic said during the webinar. “These substances cause temporary changes in how our senses perceive our environment, so that might be our perception of time, our emotional state, our visuals, or our auditory perception. These substances can also cause physical symptoms. It might cause a change in body temperature, upset stomach, vomiting, but for most people, at most reasonable doses, the symptoms are primarily this psychedelic experience.”1

Colorful MDMA pills lying on dark surface. Image Credit: © Sean - stock.adobe.com

Psychedelics may be natural (eg, psilocybin, ayahuasca), semi-synthetic (eg, lysergic acid diethylamide [LSD]), or synthetic (eg, 3,4-methylenedioxymethamphetamine [MDMA], ketamine). Substances are further distinguished by their mechanism of action, with “classic” psychedelics such as psilocybin, LSD, and dimethyltryptamine (DMT) primarily targeting the 5-HT2A serotonin receptor, whereas “nontraditional” psychedelics such as ketamine or MDMA act on different neurotransmitter systems, such as N-methyl-D-aspartate receptors.1

Importantly, ketamine and esketamine (Spravato; Janssen Pharmaceuticals, Inc)—though pharmacologically distinct from classical psychedelics—are regulated and widely used in clinical settings. Their classification as “dissociatives” has allowed them to avoid the social stigma often associated with psychedelics, thereby accelerating their medical adoption.1

Understanding the Term Dissociative

A notable aside by Cvitanovic during the webinar highlighted how ketamine came to be classified as a dissociative rather than a psychedelic—a decision that significantly shaped its medical adoption. Originally synthesized in 1962 as CI-581 by Parke Davis researchers, ketamine's classification sparked internal debate due to the contemporary stigma surrounding the term psychedelic. One early suggestion—to describe it as a “schizophrenomimetic”—would likely have derailed its clinical viability. Instead, the term dissociative was coined by Tony Domino, the wife of Edward F. Domino, PhD, one of the first physicians to administer ketamine to a human. This more neutral term helped distance ketamine from the cultural baggage of psychedelics, which were very present in the 1960s, and paved the way for its eventual acceptance in anesthesia and later, mental health treatment. Today, dissociative remains closely tied to ketamine and esketamine.1,2

A Brief History of Indigenous Use and Ethical Foundations of Psychedelics

Despite their burgeoning use in Western medicine, Cvitanovic highlighted that the contemporary medical field is rather late to the game in embracing the potential of psychedelics as a medicinal tool. Indigenous communities have used them for millennia as part of healing, spiritual, and communal practices.1

“This generation of the psychedelic renaissance comes with the responsibility of embracing the fact that these substances are not new, and while the way that they're being talked about or marketed now may be new, we are coming into this very, very late, and many of us in this room share traditions that go back generations and eons when it comes to the use of these substances,” Cvitanovic said. “We see a lot of evidence when we start looking into the psychedelic historical record for a few documented cases of use in a lot of places around the world, and then we find a lot of evidence for ongoing, sustained use in some places around the world.”1

According to Cvitanovic, archeological and ethnobotanical records show sustained use of psychedelics in regions such as Mesoamerica (peyote, psilocybin, San Pedro cactus), the Amazon basin (ayahuasca), the Andes (San Pedro cactus), Africa (iboga root/ibogaine), Australia (aboriginal plant use), and Asia and the Middle East (soma, as described in Vedic texts).1,3,4 While these traditions demonstrate the deep spiritual and medicinal significance of psychedelics, the speakers cautioned against treating indigenous cultures as monoliths, as psychedelic use was not universal, and each community holds its own distinct beliefs and practices. As new clinical and commercial models emerge, there is a shared responsibility to honor these lineages and avoid cultural erasure or exploitation, explained Cvitanovic.1

Legal Landscape in the United States

The legal framework for psychedelics in the United States remains a patchwork of federal restrictions and evolving state-level reforms. Under the federal Controlled Substances Act, most psychedelics—including psilocybin, LSD, DMT, MDMA, mescaline, and ibogaine—are classified as Schedule I substances, meaning they are deemed to have no accepted medical use and a high potential for abuse. However, this classification contradicts growing scientific evidence, including FDA breakthrough therapy designations for psilocybin to treat treatment-resistant depression and MDD, and MDMA to treat PTSD.1

Patient receiving ketamine infusion intravenously at a ketamine clinic. Image Credit: © Michael - stock.adobe.com

Ketamine is the major exception, classified as a Schedule III substance and widely used in both anesthesia and off-label psychiatric applications. As a result, ketamine has become the cornerstone of currently legal psychedelic-assisted therapy in the US, available through infusion clinics, intranasal formulations such as esketamine, and increasingly through take-home telehealth kits. While ketamine’s use outside of anesthesia is off-label, it is supported by a growing body of evidence and embraced by many providers. Additionally, the mushroom Amanita muscaria—legal in 49 states—represents another form of accessible psychedelic therapy, though its regulatory and clinical use is more limited.1

At the state level, Oregon, Colorado, New Mexico, and Iowa have initiated psilocybin access programs, either through ballot initiatives or legislative action. These programs vary in structure—some prioritize adult use and community-based healing centers, while others operate more like medical programs. Local decriminalization and deprioritization efforts also play a growing role, though Cvitanovic and Gonzalez cautioned that these measures do not equal legalization and may still carry civil penalties or enforcement inconsistencies.1

Importantly, while state and local reforms represent significant progress, they do not override federal law. This legal mismatch presents ongoing compliance risks for providers and payers alike. As psychedelic therapy continues to gain public and clinical momentum, understanding these layered jurisdictions is essential for building sustainable and legally sound care models.1

Key Legal Risks for Stakeholders

Cvitanovic and Gonzalez outlined several key legal risks for health care professionals involved in or adjacent to psychedelic services1:

1. Informed Consent and Standard of Care

As psychedelic experiences can be emotionally intense or disorienting, standard clinical consent forms may be insufficient. Cvitanovic urged providers to develop expanded consent protocols that include noting risks such as nausea, fear, or psychological distress. Providers should also prepare coprovider agreements—particularly when mental health professionals are involved in integration therapy—to ensure coordinated care.

2. Licensing, Data Collection, and HIPAA Conflicts

New state programs bring licensing and renewal protocols that vary widely and may require bespoke training for facilitators, medical providers, or both. These programs often collect granular participant data, including disability status or psychiatric diagnoses, that may not be protected under Health Insurance Portability and Accountability Act (HIPAA) unless the provider is a covered entity.

For managed care organizations, this raises several questions:

• Are providers participating in programs that collect protected health information outside of HIPAA or Health Information Technology for Economic and Clinical Health (HITECH) compliance?
• If data are required by state programs but are stored separately from electronic health records (EHRs), who owns and safeguards that data?
• Do conflicting data privacy laws (eg, across state lines) create new liabilities?

These issues are compounded when providers bill insurance for other services (eg, psychotherapy) within the same practice, potentially triggering overlapping compliance obligations, according to Cvitanovic.

3. Cybersecurity and Breach Liability

As Cvitanovic emphasized, no one is entitled to a participant’s data, and the vulnerability of these populations, particularly those with disabilities or trauma histories, makes data protection critical. State breach notification laws, HIPAA requirements, and general data privacy regulations may stack or conflict, leaving providers and insurers in murky territory.

Payers and provider networks should review whether cyber insurance policies are up to date and whether clinics have implemented sufficient data protection protocols, especially if they collect sensitive data outside of traditional EHR systems, according to Cvitanovic.

Insurance Coverage and Reimbursement

Coverage for psychedelic therapies remains limited and highly variable. Many psychedelic services are not reimbursed, and when integration therapy is covered, actual administration (eg, ketamine infusions) often is not.1 Cvitanovic highlighted a few key points1:

• Ketamine and esketamine: Esketamine is reimbursed under strict FDA protocols. Other uses of ketamine (eg, intravenous, sublingual, intramuscular) are off-label and generally not covered.
• Integration therapy: Some insurers may cover preparatory or follow-up psychotherapy sessions, even when the psychedelic intervention itself is not reimbursed.
• Provider confusion: Clinics sometimes operate under the mistaken belief that psychedelic services can be billed like other medical treatments. As Gonzalez recounted, some ketamine providers have been forced to halt insurance billing midstream due to risk exposure or lack of clarity in coverage.

Patient expectations around insurance coverage may also clash with reality, exposing clinics to reputational or financial risk. Providers would benefit from confirming that malpractice or business insurance policies cover psychedelic services, as gaps in coverage are common.1

Regulatory Uncertainty and Emerging Policy Trends

During the webinar, Cvitanovic and Gonzalez noted that several legal and regulatory gaps remain unresolved1:

• Drug Enforcement Administration scheduling and enforcement: Despite growing research and state-level momentum, Schedule I classification remains a barrier to wider adoption. Religious use and “right to try” exemptions (eg, for terminally ill patients) remain largely untested in clinical practice.
• Training and accreditation: There is no unified standard for psychedelic facilitator training, complicating efforts to evaluate care quality.
• Standard of care development: Variability in protocols—even within the same city—makes malpractice defense and policy design difficult.

Still, momentum is building. Cvitanovic predicted increased federal approvals of psychedelic therapies by 2030 and further state-funded clinical trials. The potential for industry growth (estimated to exceed $8 billion globally by 2030) makes it increasingly likely that payer and provider systems will intersect with psychedelic services.1

Vulnerable Populations: Disability and Access

A notable focus of the webinar was the importance of centering disabled communities in the development of psychedelic policy. Cvitanovic, who has a disability herself, noted that these therapies may offer hope to populations poorly served by conventional treatment.1

However, psychedelic programs can represent both hope and risk for disabled individuals, Cvitanovic noted. Localized psychedelic access can eliminate travel barriers but may also demand disclosure of disability status and participation in data-intensive systems. Cvitanovic also warned against replicating the “Trojan horse” pattern seen in cannabis legalization—where medical and disability-centered advocacy is used to push broader reform, only to have those communities later marginalized and forgotten once legalization moves forward.1

Conclusion

As psychedelic-assisted therapies gain traction within mental health care, the legal and regulatory frameworks guiding their adoption remain deeply fragmented and are evolving in real time. The emergence of state-level programs, increasing off-label ketamine use, and federal breakthrough therapy designations signal a paradigm shift in treatment options for mood disorders, trauma, and chronic pain. Yet this momentum is tempered by persistent legal ambiguity, compliance risks, and insurance limitations.1

Perhaps most critically, the development of psychedelic care models would benefit from being rooted in historical awareness and cultural respect. Indigenous traditions offer centuries of information around the safe and meaningful use of these substances—wisdom that should not be sidelined in the pursuit of clinical or commercial innovation, according to Cvitanovic.1

“The [psychedelic medicine] space is changing every single day,” Cvitanovic said.1 "No one is going to be a perfect example of what it means to work in this space, but we all have an obligation to work towards that ideal, and I hope that we do that with respect."

REFERENCES

1. Cvitanovic V, Gonzalez J. Psychedelics law 101: navigating legal risks and building a compliant practice. Rudick Law Group, PLLC. July 29, 2025. Accessed July 29, 2025. https://rudicklawgroup.news/p/join-us-july-29-2025-for-a-free-webinar-psychedelic-law-101-navigating-legal-risks-and-building-a-co
2. Kharasch ED. The nine lives of ketamine: from CI-581 to present day clinical application-commentary on Domino et al. Clin Pharmacol Ther. 2025;117(6):1499-1515. doi:10.1002/cpt.3634
3. Carod-Artal FJ, Vázquez-Cabrera CB. Mescaline and the San Pedro cactus ritual: archaeological and ethnographic evidence in northern Peru. Rev Neurol. 2006;42(8):489-498.
4. Corkery JM. Ibogaine as a treatment for substance misuse: potential benefits and practical dangers. Prog Brain Res. 2018;242:217-257. doi:10.1016/bs.pbr.2018.08.005