The tradition of challenging is simplistic and entertaining. While specific rules vary per unit, the challenge typically only applies to those of the organization. This can also lead to some heated “discussions” when challenges are issued outside the original organization. Challenging is meant to build esprit de corps and sense of unit cohesion; however, forcing challenges can often have the opposite effect if many do not share similar coins.
The challenge can be made at any time, and place. The one initiating the challenge takes their coin and taps it on the table, or other surface, and announces to those attending that that a challenge is being issued. It is also accepted to slap the coin down on the table while shouting at the top of one’s lungs, but this is not recommended as losing control of the coin and risking it to fall on the floor automatically means one is deliberately challenging the entire room.
In response, the individual (or group) being challenged must immediately produce his or her own challenge coin. Failure to do so means those without their unit’s challenge coin must buy the group a round of drinks. Due to the difficulty in continually carrying the challenge coin many units permit a “step and a reach” to obtain one’s challenge coin; however, if anyone is able to produce their own challenge coin then the challenger must buy the round of drinks.
Some popular variants of the challenge coin rules include everyone in the group must buy a drink for the individual holding the highest-ranking coin. If one is able to steal the challenge coin of a rival unit, everyone in the group must buy that individual a drink. And while typically a response to a challenge is considered to be immediate, some units permit a specific time limit in which to respond as well.
One important consideration to maintain is the integrity of the challenge coin itself. At no point is it permissible to deface or modify the coin in such a manner as to facilitate ease in carrying. If it is attached to a key ring, belt buckle, or drilled to attach a lanyard it no longer qualifies as a challenge coin. 
1. CoinForce. Challenge Coin Rules. http://www.coinforce.com/challenge-coin-rules.htm (accessed October 6, 2012).
2. JFK Special Warfare Museum. Special Forces Coin Rules and History. 2002. http://www.sfalx.com/h_coin_rules_and_history.htm (accessed October 6, 2012).