Origins of the challenge coin in USA (from Wikipedia)

Like so many other aspects of military tradition, the origins of the challenge coin are a matter of much debate with little supporting evidence. While many organizations and services claim to have been the originators of the challenge coin, the most commonly held view is that the tradition began in the United States Army Air Service (a forerunner of the current United States Air Force).

Air warfare was a new phenomenon during World War I, when the army created flying squadrons and manned them with volunteer pilots from every walk of civilian life. While some of the early pilots came from working class or rural backgrounds, many were wealthy Ivy League students who withdrew from classes in the middle of the year, drawn by the adventure and romance of the new form of warfare.

As the legend goes, one such Ivy Leaguer, a wealthy lieutenant, ordered small, solid-bronze medallions (or coins) struck, which he then presented to the other pilots in his squadron as mementos of their service together. The coin was gold-plated, bore the squadron’s insignia, and was quite valuable. One of the pilots in the squadron, who had never owned anything like the coin, placed it in a leather pouch he wore around his neck for safekeeping. A short while later, this pilot’s aircraft was heavily damaged by ground fire (other sources claim it was an aerial dogfight), forcing him to land behind enemy lines and allowing him to be captured by the Germans. The Germans confiscated the personal belongings from his pockets, but they didn’t catch the leather pouch around his neck. On his way to a permanent prisoner of war facility, he was held overnight in a small German-held French village near the front. During the night, the town was bombarded by the British, creating enough confusion to allow the pilot to escape.

The pilot avoided German patrols by donning civilian attire, but all of his identification had been confiscated so he had no way to prove his identity. With great difficulty, he sneaked across no-man’s land and made contact with a French patrol. Unfortunately for him, the French had been on the lookout for German saboteurs dressed as civilians. The French mistook the American pilot for a German saboteur and immediately prepared to execute him.

Desperate to prove his allegiance and without any identification, the pilot pulled out the coin from his leather pouch and showed it to his French captors. One of the Frenchmen recognized the unit insignia on the coin and delayed the execution long enough to confirm the pilot’s identity.

Once the pilot safely returned to his squadron, it became a tradition for all members to carry their coin at all times. To ensure compliance, the pilots would challenge each other to produce the coin. If the challenged couldn’t produce the coin, he was required to buy a drink of choice for the challenger; if the challenged could produce the coin, the challenger would purchase the drink.

This tradition spread to other flying squadrons and, eventually, to other military units in all branches of service and even to non military organizations. Today, challenge coins are given to members upon joining an organization, as an award to improve morale, and sold to commemorate special occasions or as fundraisers.

President Bill Clinton displayed several racks of challenge coins, which had been given to him by U.S. servicemembers, on the credenza behind his Oval Office desk. The challenge coins appear in the background of his official portrait, now hanging in the White House.

Challenging

The tradition of a challenge is the most common way to ensure that members are carrying their unit's coin. The challenge, which can be held at any time, begins with the challenger drawing his/her coin, and slapping or placing the coin on the table or bar. (Should the coin be accidentally dropped, the challenge is still valid.). Everyone being challenged must immediately produce the coin for their organization and anyone failing to do so must buy a round of drinks for the challenger and everyone else who has their challenge coin. However, should everyone challenged be able to produce their coin, the challenger must buy a round of drinks for the group. If you are able to steal a challenge coin everyone in the group must buy you a drink. During a challenge everyone in the group must buy you a drink if you are the holder of the highest ranking coin. (District Coin, Division Coin).