Need A Penny? Too Bad: Legal Implications Of The U.S. Penny Shortage

Highlights

• The discontinuation of penny production is creating nationwide pricing, cash-handling and compliance challenges, especially in states and cities with cash acceptance, cash discrimination and cash-discount disclosure laws.
• Traditional rounding practices may violate consumer protection rules, including cash discrimination statutes, Supplemental Nutrition Assistance Program (SNAP) regulations, credit card surcharging restrictions and wage-payment requirements, unless retailers apply compliant rounding methods such as rounding all cash and SNAP transactions down.
• Federal legislation known as the Common Cents Act would create a uniform national rounding standard, but until enacted, businesses must review state and local requirements, communicate policies clearly and maintain documentation to minimize legal risk.

The U.S. Department of the Treasury's decision to cease minting 1-cent coins has led to a severe shortage in penny circulation that requires businesses to adapt their pricing and payment strategies. As organizations respond to this monetary shift, they should be cognizant of state and local laws prohibiting merchants from charging cash-paying customers more than those using other payment methods. This Holland & Knight alert provides an overview of the penny discontinuation, examines relevant legal restrictions on cash payment surcharges and offers compliance guidance for businesses.

Background

The cost of minting a penny has long exceeded the coin's value.¹ After President Donald Trump called for a discontinuation in the "wasteful" minting of pennies, the U.S. Mint placed its last production order in May 2025.

The Federal Reserve's FedCash Services operation handles the distribution of currency to financial institutions at 165 locations across the U.S. According to the FedCash website,² as of Oct. 29, 2025, 83 of those locations – including those in New York, Chicago, Philadelphia, Boston and San Francisco – will have distributed their last penny. In almost all cases, these locations will also cease accepting deposits of pennies, meaning that some banks will have a surfeit of pennies that they can't easily offload to the Federal Reserve.³

These changes have created operational challenges across multiple industries, forcing adaptation of cash-handling systems, pricing strategies and consumer education efforts nationwide. A coalition of retailer trade associations outlined its concerns in a September 2025 letter to congressional leaders.⁴

When Canada discontinued production of its penny in 2013, retailers generally rounded all prices to the nearest 5 cents, and the economic impact of that rounding has been shown to be negligible in the aggregate.⁵ In the U.S., however, there are several legal problems with traditional rounding (i.e., rounding down figures ending in 1, 2, 6 and 7 cents and rounding up those with 3, 4, 8 and 9 cents).

Cash Acceptance Laws

Though the Treasury Department is discontinuing penny production, existing pennies remain legal tender pursuant to the Coinage Act.⁶ Federal law does not require private businesses to accept cash payments unless state or local laws mandate otherwise.

Importantly, several states and municipalities require that retailers accept cash payments.⁷ In most of those jurisdictions, the law prohibits retailers from charging cash-paying customers more than those using credit cards or other payment methods.⁸ Rounding cash transactions up, without doing so for non-cash customers, would result in cash customers paying more – in violation of these laws.

In most cases, violation of these cash discrimination statutes constitutes an unfair trade practice under state law. Businesses violating these prohibitions may face regulatory enforcement actions, including per-violation civil penalties as high as $15,000, and consumer class actions.

One potential solution to this state and local law issue is to round all cash transactions down. Though this would solve issues with these "cash discrimination" laws, it may create other compliance concerns. It also would cost retailers as much as 4 cents for each transaction rounded down.

Surcharging and Cash Discounting

Laws in Connecticut, Maine, Massachusetts and New York restrict sellers from charging customers paying by credit card more than customers paying by other methods (generally referred to as "surcharging").⁹ Nevertheless, each of these states¹⁰ (and the federal Truth in Lending Act) allows discounts for customers paying by a means other than credit card.¹¹ In some cases, those laws require explicit disclosure of the availability of the that discount. By way of example, Connecticut General Statute 42-133ff(c)(1) provides:

As such, retailers rounding down cash transactions (but not rounding payments by credit card) should prominently disclose this policy at the point of sale.¹²

Federal Law: SNAP Program Regulations

Businesses that accept payments under the federal Supplemental Nutritional Assistance Program (SNAP) face additional compliance issues. Federal regulations prevent SNAP participants from being treated differently than cash-paying customers:

As such, retailers who are rounding cash prices down to the nearest nickel, in light of the state and local laws described above, should consider whether to also round SNAP transactions in the same manner so that the SNAP price is equal to the cash price.¹⁴

Banks, Check Cashing and Remittance Providers

Financial institutions, retailers and other parties cashing checks or paying out remittances may face issues when the amount would require payout in pennies. Rounding payouts down would implicate various state and federal laws, so parties facing a penny shortage may be forced to round payouts up to the nearest nickel.

Similarly, employers paying wages in cash are required by law to ensure that the payees receive their full wages, thus prohibiting rounding down.

Proposed Federal Legislation: The Common Cents Act

In response to these challenges, bipartisan legislation known as the Common Cents Act¹⁵ has been introduced to address key issues caused by the penny discontinuation.

The legislation aims to create a national standard allowing businesses to round transactions to the nearest nickel, which would preempt state and local laws that currently prohibit this practice. This would apply to "any person selling goods or services in a cash transaction, entering into any other transaction that results in a payment or transfer of cash between the parties to the transaction, or paying cash wages to an employee as compensation." The intent of the Common Cents Act would be to obviate all the state and federal legal complications described above.

Industry associations representing retailers, restaurants, convenience stores, grocers and fuel marketers have urged Congress to pass this legislation quickly, noting that without these legal remedies, it is becoming "challenging to legally engage in cash transactions with customers in growing swaths of the country."

Practical Guidance for Businesses

To navigate the discontinuation of penny production while remaining compliant with applicable laws, retailers should:

1. Review Applicable Laws. Determine which state and local laws apply to your business locations regarding cash acceptance and cash discounting.
2. Monitor Legislative Developments. Track the progress of the Common Cents Act and similar legislation that may provide relief from conflicting legal requirements.
3. Implement Compliant Rounding Systems. Consider implementing rounding systems that apply equally to all payment methods or round all cash (and SNAP) transactions down.
4. Clear Communication. Clearly communicate rounding policies to customers through signage, receipts and staff training.
5. Documentation. Maintain records demonstrating that any pricing or payment policies are applied uniformly and do not discriminate against cash users.

Conclusion

The federal decision to cease minting pennies has created practical challenges that businesses must address while navigating complex consumer protection regulations. As penny circulation continues to decline, forward-thinking companies should develop compliant strategies that address this permanent change to U.S. currency while minimizing legal exposure and customer dissatisfaction. The Common Cents Act represents a potential solution to these challenges, but until such legislation is enacted, businesses must carefully balance operational needs with legal compliance.

Holland & Knight's Consumer Protection Defense and Compliance and Financial Services teams can assist in developing compliant strategies tailored to your business needs and geographic footprint.

Footnotes

1. In 2024, the cost to mint each penny was 3.69 cents (and each nickel cost 13.78 cents to mint), according to the U.S. Mint.

2. FRBservices.org. This is up from 28 locations at the end of September 2025.

3. In such cases, the FedCash website suggests that financial institutions deposit pennies at an alternate location, which is unlikely to be cost-effective.

4. Letter to congressional leaders.

5. Christina Cheung, An Economic Analysis of Penny-rounding on Grocery Items.

6. "United States coins and currency are legal tender for all debts, public charges, taxes and dues," 31 USC 5103 - Legal tender.

7. See, for example, New Jersey Revised Statutes Section 56:8-2.33 (2024).

8. See, for example, Massachusetts General Law - Part I, Title XX, Chapter 140D, Section 28A, 5 Delaware Code § 2501H and D.C. Law 23-187.

9. Statutes prohibiting surcharges in remain on the books in other states, including California, Texas and Florida, but their enforcement has been restricted by court challenges.

10. Note that Puerto Rico prohibits surcharges and cash discounts, which was recently upheld by the U.S. Court of Appeals for the First Circuit in Asociación de Detallistas de Gasolina de P.R., Inc. v. Puerto Rico.

11. These are colloquially referred to as "cash discounts," but in many states, they are not limited to cash. By way of example, the applicable Connecticut law, Conn. Gen. Stat. Sec. § 42-133ff, provides that "Nothing in this section shall prohibit any person from offering a discount on any transaction to induce payment by cash, check, debit card or similar means rather than by charge card or credit card."

12. Card network rules also restrict credit card "surcharges" but allow discounts for payment by other methods as long as the discount is applied to the posted or advertised price.

13. 7 C.F. R 278.2(b).

14. This may still result in SNAP customers being treated "differently" (though more favorably) than other non-cash customer

15. S.1525.