Given the national controversy over the Congress’s passing of the Legal Tender Act, it was perhaps inevitable that the Supreme Court would be the ultimate arbiter of what, exactly could be classified as legal tender in the US. Settling the point in a series of cases familiar to legal scholars as the Legal Tender Cases, the Supreme Court made it clear that Congressional authority over the status of ‘money’ in the US is absolute.
However, the classification of paper money as legal tender was far from a foregone conclusion initially. Indeed, in the first of the Legal Tender Cases, the Court decided entirely the opposite as the initial attempt of Congress to declare paper money to be legal tender was voided by the Court in Hepburn[i]. While the Court there did affirm that Congress had the power to print paper currency, it noted that it could do so only for the purpose of creating a medium of exchange and not as a legal tender[ii]. In other words, and in a decision that reflected a pre-Legal Tender Act conception of the concept of legal tender, the Court in Hepburn declared that the pieces of paper Congress was printing, despite congressional intent, served only as promises to pay gold or silver coins (i.e. legal tender) at some later time.
Not only were greenbacks not a de jure legal tender under this analysis (as Congress intended), they were arguably not even a de facto legal tender through practice as an unwilling party could reject accepting them as a right.
This created clear problems from the perspective of a Congress which had just tried to legislate the exact opposite outcome. The government had incurred large debts to finance the Civil War, and if it had remained the case that creditors would have no obligation to accept payment in greenbacks, if gold coins on demand had become the only accepted means of payment to private creditors, it is a strong possibility that the US government would have had to default on its debts[iii] [iv].
However, those who backed a coins-only legal tender regime didn’t have long to gloat after Hepburn, and the national problems identified above were solved by the Court not too long after the Court created them[v]. Indeed it was less than two years before two new appointments to the Court rebalanced it and were able to turn the proposition that only coins were legal tender entirely on its head[vi]. However, before that came a case which would prove critical to later decisions.
In  Veazie Bank v. Fenno, 75 U.S. 533, 548 (1869), the Court, while not going so far as to say that paper money was legal tender, did take a critical step in that direction by recognizing that the Congress had the right to make debts receivable in bills and also to make those bills a consistent, uniform means of measure (something opponents would claim was solely the realm of specie):
eremiah Newhall is a graduate of The George Washington University Law School and currently serves as a law clerk in Chicago. He can be reached via the miracle of email. Joshua Sturtevant is also a GW Law grad, and currently serves as an in-house legal fellow at a renewable energy financing and development firm.