In 1965 and '66, author Ken Kesey and his friends, called the Merry Pranksters, held a series of parties called "acid tests." LSD, which was not outlawed in the U.S. until 1968, flowed freely at these parties in San Francisco. A "graduation" for those who "passed the acid test" was scheduled for Halloween, 1966.
The circumstances leading up to the graduation have been well documented, by Tom Wolfe in his 1968 novel “The Electric Kool-Aid Acid Test” and by the first salaried employee of Rolling Stone magazine, Charles Perry, whose 1984 “The Haight-Ashbury: A History” stands as a definitive chronicle of the late-1960s San Francisco scene. Kesey had been working with rock-promoter Bill Graham to host his graduation ceremony at the Winterland Arena. The Grateful Dead would be the headliners, with support from a group of former Stanford University students called the Anonymous Artists of America.
Plans changed, but the graduation ceremony went on. Now one of those rare diplomas is up for sale, and the story behind it is explained at Collector's Weekly. Link