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About 50.5 percent of voters supported the ordinance, while 49.4 percent were against, election officials said.
The results will not be formalized until May 16th.
The text of the order seeks to "minimize, as far as possible, the priorities" of the criminal penalties imposed by the City of Denver "for personal use and personal possession of psilocybin mushrooms".
The city is about to establish a "policy review committee to evaluate the effects of the order and report back" in accordance with the requirements of the initiative.
Although mushrooms are not legalized, the ordinance "would prohibit the city from spending resources to impose penal sanctions" on those who would have them.
Drugs have long been popular for recreational use. However, a growing body of medical research shows that psilocybin can treat conditions such as anxiety and depression, in cases where drugs currently on the market can not.
Denver led the nation in the evolution of drug policy
Kevin Matthews, Decriminalize Denver campaign manager, organized the basic effort to decriminalize psilocybin mushrooms.
Matthews told CNN that he attributed to the mushrooms the fact of "really saving my life".
He had been a cadet at the US Military Academy when he had developed a major depression and received a medical discharge.
"My life had collapsed under my feet," he said.
After years of suffering and not finding a solution, Matthews said his friends had introduced him to psilocybin mushrooms.
"The positive effects lasted weeks and weeks and weeks," he said. "I felt pretty isolated and alone and until then, I could not see the love all around me."
Decriminalize Denver, writes on its website, "Humans have been using these mushrooms for thousands of years for healing, rites of passage, spiritual vision, community building and awareness,"
The group also argues that "an arrest is too much for a thing with risks as low and manageable for most people, compared to its potential profits".
"Denver is fast becoming the global capital of illicit drugs," Hunt said. "The truth is that we have no idea of the long-term effects of these drugs on the health of Colorado residents."
Scott McLean and Chris Boyette from CNN contributed to this report.
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