Oregon's Newly Legal Magic Mushroom Industry Could Be Strangled by Restrictive Zoning Regulations

Local governments are considering rules that could force "psilocybin service centers" to locate near highways and go through expensive, discretionary permitting processes.

Magic mushrooms are starting to win the war on drugs in Oregon. Now comes the harder task of winning approval from local zoning officials.

Back in 2020, Beaver State voters passed the first-ever ballot initiative allowing adults 21 and up to consume psilocybin (the psychoactive ingredient in magic mushrooms) in special "psilocybin service centers" with a licensed "facilitator" present. Come January, the Oregon Health Authority will start accepting license applications for such centers.

To get ahead of the game, businesses have started acquiring rural properties that could serve as ideal mushroom retreat locations. Existing rural hospitality businesses have also expressed interest in expanding their operations to include psilocybin retreat services.

Many of these would-be operators are now running into a wall of local red tape.

The initiative that legalized magic mushroom businesses allows cities and counties to ban them via ballot initiative. Local governments also retain the power to craft "time, place, and manner" regulations over psilocybin businesses.

This past election, 25 of Oregon's 36 counties voted to ban psilocybin businesses, including four that voted to legalize psilocybin in 2020. Only two counties that put the questions to voters, Deschutes and Jackson counties, kept these businesses legal.

And this week, those two counties will consider new land use regulations that could severely restrict where newly legal "psilocybin service centers" can set up shop.

That includes Silo Wellness. The Canada-headquartered company already operates one psilocybin retreat in Jamaica, and it plans to open another one on a 960-acre ranch in unincorporated Jackson County.

Mike Arnold, founder of Silo Wellness, has said the property is ideal for his business given its physical beauty and minimal investments needed to make it trip-ready.

But earlier this month, Jackson County's planning commission almost axed that plan by proposing zoning regulations that would have restricted psilocybin businesses to the county's handful of "general commercial" zoned properties adjacent to Interstate 5.

"Highway noise and sirens aren't exactly the best setting for psychedelic therapy," said Arnold in a statement.

Testimony from Arnold and other pro-psilocybin residents and aspiring entrepreneurs saw the planning commission reverse itself slightly, reported Oregon Business. Following a November 10 meeting, commissioners produce a revised ordinance that would allow psilocybin businesses as home occupations and in rural areas.

These are just recommendations, however.

This week, the Jackson County Board of Commissioners will take up psilocybin zoning regulations. They could choose to adopt the planning commission's relatively light regulations or they could revert to the original plan to restrict these businesses to highway-adjacent commercial areas.

That means Silo Wellness isn't out of the woods yet. Arnold said in a press release that his company would consider litigation if more restrictive regulations are passed.

A similar process is playing out in Deschutes County, where the county Board of Commissioners held a public hearing on psilocybin regulations Monday.

There too, the county planning commission has recommended a relatively light-touch approach to regulating psilocybin centers. They've suggested allowing psilocybin businesses in large swaths of the county, including at existing resorts. They've also recommended allowing overnight stays at psilocybin centers, and permitted these centers to offer ancillary services like yoga and meditation.

But the Board could ultimately choose to adopt more restrictive regulations. And even the planning commission's recommended ordinance would still require psilocybin centers to go through expensive, discretionary site plan and conditional use approval processes.

Those requirements would come on top of all the Oregon Health Authority's regulations.

When marijuana was legalized in Oregon, it went through a similar journey. Voters approved a relatively liberal legalization ballot initiative. The legislature followed this up with more constricting regulations. Then a long list of local governments opted not to allow marijuana businesses. Those that did often imposed zoning regulations that made a lot of prime real estate off-limits to the new industry.

Given that history, it's perhaps unsurprising that local governments would want to tightly regulate legalized psychedelics facilities—given how novel and new they are.

Subjecting new industries to heavy regulation is nevertheless a great way to strangle them in the crib. A business as weird as legalized shrooms requires a lot of experimentation. And we shouldn't trust county commissions to design the perfect trip.