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Genome-wide association studies (GWAS) have identified an increasing number of genetic variants that significantly associate with psychiatric disorders. Despite this wealth of information, our knowledge of which variants causally contribute to disease, how they interact, and even more so of the functions they regulate, is still poor. The availability of embryonic stem cells (ESCs) and the advent of patient-specific induced pluripotent stem cells (iPSCs) has opened new opportunities to investigate genetic risk variants in living disease-relevant cells. Here, we analyze how this progress has contributed to the analysis of causal relationships between genetic risk variants and neuronal phenotypes, especially in schizophrenia (SCZ) and bipolar disorder (BD). Studies on rare, highly penetrant risk variants have originally led the field, until more recently when the development of (epi-) genetic editing techniques spurred studies on cause-effect relationships between common low risk variants and their associated neuronal phenotypes. This reorientation not only offers new insights, but also raises issues on interpretability. Concluding, we consider potential caveats and upcoming developments in the field of ESC/iPSC-based modeling of causality in psychiatric disorders. [ABSTRACT FROM AUTHOR]