Jefferies analyst Andrew Tsai says Trump's executive order on psychedelics is an 'official stamp of validation' for investors

For analysts, that shift is already showing up in the market. Andrew Tsai of Jefferies called the order an "official stamp of validation," suggesting the administration's backing could help move psychedelic therapies from a high-risk, fringe play into a more credible and investable part of the market.

Policy shift sends psychedelic stocks soaring

U.S.-listed shares (4) of Compass Pathways Plc jumped as much as 39% before the opening bell, while Atai Life Sciences surged 32%. Definium Therapeutics climbed 27% and GH Research PLC rose 20%, as investors rushed into a sector that, almost overnight, looks far less like a long shot.

The order directs the U.S. Food and Drug Administration to introduce expedited review vouchers (5) for psychedelic therapies with "breakthrough" designation, potentially shrinking approval timelines from six to 10 months down to as little as one to two (4). The faster a drug moves through the approval process, the sooner companies can move toward commercialization — a key factor in how these firms are valued.

Several of the companies leading the gains, including Compass Pathways (6) and Atai (7), already have treatments with that designation, putting them in a position to benefit first if timelines accelerate.

In a note to clients, Brian Abrahams of RBC Capital Markets (4) called the move "a substantial step towards diminishing regulatory risk in this emerging class of therapies, enabling investor comfort," adding it signals growing openness to psychedelics at the federal level.

That optimism is also showing up in long-term projections. The global psychedelic drugs market is expected to reach about $10.75 billion by 2027, according to The Psychedelic Drugs Market research report (8).

Why now?

A growing body of new studies (9) has brought renewed attention to psychedelics, particularly for conditions like PTSD and severe depression — areas where demand for new treatments remains high. More than 20% of adults live with a mental illness, according to a report by the Substance Abuse and Mental Health Services Administration (10).

While the move may feel sudden, the momentum around psychedelics as a treatment option has been building for decades. In the 1950s (11), researchers were actively studying psychedelics as potential treatments for addiction and mental-health conditions. That work largely came to a halt in the 1970s, as rising recreational use — along with mounting social and political pressure — led to stricter regulations and a prolonged pause in clinical research.

Now, a wave of new studies and shifting regulatory signals are bringing psychedelics back into focus, both within the medical community and among investors. But progress hasn't been linear. In 2024 (12), the FDA rejected an MDMA-assisted therapy for PTSD from Lykos Therapeutics, citing concerns about trial design and the quality of the data. At the time, CEO Amy Emerson said (13) the agency's request for another Phase 3 trial could delay progress by several years.