Vancouver city council struck down a motion Wednesday night to deter and prevent the sale of psilocybin mushrooms, a psychedelic drug also known as magic mushrooms.

The motion from Coun. Melissa De Genova linked the sale of mushrooms, which are classified as an illicit drug in Canada, to the widespread money laundering in the province identified in a 2018 report by ex-Mountie Peter German.

"I want to make sure that we are definitely deterring money laundering," said De Genova during Wednesday's council meeting.

She says that many cannabis dispensaries have paid for business licences in cash amounts of tens of thousands of dollars and fears that allowing the sale of an illicit substance like mushrooms leaves open more avenues for money laundering.

Magic mushrooms contain hallucinogens, usually psilocybin and psilocin, which can cause people who use them to see, hear or feel things that are not really there. They may also experience anxiety, fear, nausea and muscle twitches.

More than a dozen speakers lined up to speak about the motion before council, including Mark Haden of UBC's School of Population and Public Health, who spoke out against enforcement.

"Drug prohibition is a huge waste of resources," said Haden. "Criminal enforcement approaches to drug crimes have always failed."

Other speakers testified about the benefits they had observed from the use of mushrooms in treating anxiety and addiction.

Health Canada says there is little evidence that people can become dependent on magic mushrooms.

It adds that psilocybin is being studied in clinical trials for its potential to treat conditions like anxiety, depression, obsessive compulsive disorder and problematic drug use, but that there are no approved therapeutic products containing the substance in Canada.

De Genova's motion also raised concerns about the City of Vancouver's difficulties with enforcement related to cannabis dispensaries operating without a licence, taking up municipal staff's time and resources.

Her motion called for staff to study how the city's annual budget would be affected if there was no action to shut down the sale of illicit substances.

In voicing his opposition to the motion, Coun. Pete Fry called it "anti-drug hysteria."

"The very language about deterring and preventing the sale of psylocibin from the get-go imparts a stigma onto what is potentially a life-saving intervention," said Fry.

The motion was defeated in council by a 6-2 vote.