U.S. Penny Phaseout Leaves Retailers and Banks in Legal Limbo

The U.S. is grappling with a cascading crisis as the abrupt discontinuation of penny production has left retailers, banks, and consumers scrambling for solutions. President Donald Trump's February 2025 directive to halt penny minting—citing the 3.69-cent production cost per coin—has triggered a nationwide shortage, forcing businesses to adopt costly workarounds and sparking legal uncertainties, according to an ABC News report. With the U.S. Mint's last pennies distributed by August 2025 and 83 of 165 Federal Reserve coin terminals now refusing penny deposits, the shortage has escalated into a systemic challenge for commerce, as detailed in a Holland & Knight analysis.

Retailers are bearing the brunt of the disruption. Kwik Trip, a Midwest convenience store chain, estimates it will lose $3 million this year by rounding down cash transactions to the nearest nickel to avoid lawsuits, according to a USA Today story. Kroger has posted signs urging customers to pay with exact change in central Ohio locations, while Home Depot and other retailers face similar constraints. The National Retail Federation warns that rounding practices could violate state laws prohibiting price discrimination between cash and card users, complicating compliance for businesses, the Holland & Knight analysis notes.

The legal labyrinth extends to federal programs. The Supplemental Nutrition Assistance Program (SNAP), which prohibits price rounding for food purchases, now risks noncompliance as retailers struggle to provide exact change, the Holland & Knight analysis warns. Similarly, paycheck-cashing services and employers distributing wages face hurdles in adhering to labor laws that mandate precise payouts, the same analysis adds.

Banks are equally strained. Louisiana-based Guaranty Bank & Trust Co. depleted its $1,800 penny stock in two weeks after the Federal Reserve curtailed shipments, the ABC News report found. Troy Richards, the bank's COO, notes that branches now retain only minimal pennies for check-cashing, exacerbating liquidity challenges for low-income customers, the ABC News report added.

The Treasury Department's decision lacks regulatory guidance, leaving industries to navigate the fallout independently. A coalition of retail associations, including the National Association of Convenience Stores and the Retail Industry Leaders Association, has urged Congress to pass the Common Cents Act—a bipartisan bill that would permit nationwide rounding to the nearest nickel, the USA Today story reported. Without such legislation, businesses must contend with a patchwork of state laws, some of which explicitly ban rounding practices, the Holland & Knight analysis cautions.

The economic and social ramifications are pronounced. With 250 billion pennies still in circulation but localized shortages persisting, the Treasury projects $56 million in annual savings from ceasing production, while the Mint's 2024 seigniorage of $182 million—a profit from other coinage—offsets these savings, the ABC News report notes. Analysts argue that the abrupt phaseout contrasts with Canada's 2013 penny elimination, which allowed a decade of gradual transition, the ABC News report also observed.

As the holiday shopping season approaches, industry leaders warn of worsening disruptions. "This chaotic implementation is hurting low-income Americans and rural communities most," said Bill Maurer, a UC Irvine professor specializing in financial systems. With no immediate federal solution, retailers and banks face a precarious balancing act between operational sustainability and legal compliance.