Challenge coins surfaced during the WWII era. The practice of carrying a coin designed specifically for a military unit was popular with the Army Special Forces. Carrying the coin at all times and presenting it when “challenged” to prove affiliation with that unit resulted in a number of consequences for those who could not produce a coin; the most popular consequence required the coin-less soldier to buy a round of drinks. That practice continues to be popular today. (Courtesy of Symbol Arts)
As a matter of fact, today, if someone accidentally drops their coin while in the club, if everyone shows their coin, the one who dropped or initially challenged has to buy the drinks.
My coin rack with my New Mexico Military Institute Regimental photo- I’m the Regimental Drum Major.