What is the constitutional basis for Transactional Gold and Silver?

A plain-language explanation of how Article I, Section 10 of the U.S. Constitution authorizes TGS -- and why the Founders wrote it that way.

What is the constitutional basis for TGS?

Article I, Section 10, Clause 1 of the U.S. Constitution is one of the most precise and unambiguous clauses in the entire document. It states, in relevant part: 'No State shall... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts.' The clause does three things: it prohibits states from coining money independently, prohibits states from issuing paper currency (bills of credit), and prohibits states from making anything other than gold and silver coin a legal tender for payment of debts.

The third prohibition is simultaneously a limitation and an authorization. States cannot make fiat paper legal tender. States cannot make cryptocurrency legal tender. States cannot make any digital instrument legal tender. The only thing states can make a tender in payment of debts, the only monetary recognition the Constitution permits at the state level, is gold and silver coin. TGS legislation does exactly that: it recognizes gold and silver as legal tender at the state level. It is the exercise of the precise constitutional authority the Founders wrote into Article I Section 10.

Why did the Founders write this into the Constitution?

The Founders' experience was direct and recent. During the Revolutionary War, the Continental Congress issued paper currency, Continental dollars, that were not backed by gold or silver. The Continental dollar inflated catastrophically, losing nearly all its value by the end of the war. 'Not worth a Continental' became a phrase in the American lexicon. The Founders wrote Article I Section 10 to prevent this from happening again at the state level, and to ensure that gold and silver remained the lawful foundation of the monetary system they were constructing.

James Madison explained the clause in Federalist No. 44: the prohibition on bills of credit was designed to prevent the 'pestilent effects of paper money on the necessary confidence between man and man, on the necessary confidence in the public councils, on the industry and morals of the people.' The Founders were not theorizing about sound money; they had watched paper currency destroy economic relationships within living memory, and they wrote its constitutional prohibition with that experience fresh.

How does the TGS Act connect to Article I Section 10?

Section 102 of the Transactional Gold and Silver Act opens with the legislative findings that establish the Act's constitutional grounding. Finding (1) cites Article I, Section 10 directly: the Act is an exercise of the state's authority to recognize gold and silver as legal tender under the constitutional provision that reserves this power to the states. Finding (2) notes that advances in financial technology now make it practically possible for individuals to use gold and silver as everyday money -- providing the policy rationale for applying the constitutional authority now rather than leaving it dormant.

Section 301 of the Act then exercises that authority directly: it recognizes gold and silver as legal tender within the state for the payment of debts and for the provision of Constitutional Money Services. This is the operative legal effect of the constitutional authorization -- the state formally recognizing what the Constitution already permits.

Has the Supreme Court addressed this?

The Supreme Court's legal tender cases from the Reconstruction era addressed the federal government's authority to issue paper currency as legal tender, a different question from the states' authority under Article I Section 10. The states' authority to recognize gold and silver as legal tender has not been the subject of major Supreme Court litigation in the modern era, in part because no state had created a comprehensive transactional gold and silver framework before Texas's 2015 legislation.

The constitutional text of Article I Section 10 is clear on its face. States may make gold and silver coin a tender in payment of debts; it is the only monetary instrument the clause permits at the state level. Five governors have reviewed TGS legislation and found it constitutionally sound before signing. That executive branch legal review, combined with the plain text of Article I Section 10, constitutes the practical constitutional foundation on which TGS operates today.

What is the most common misunderstanding?

References

Related questions