Is it illegal to damage or deface coins?
Defacing a Coin to make a Coin-ring is not illegal as long as you sell it as a novelty item and not as currency. What would make it illegal is if there is a fraudulent intent to alter or change a coin to deceive someone and represent the coin from another face value than its actual.
“Section 331 of Title 18 of the United States code provides criminal penalties for anyone who “fraudulently alters, defaces, mutilates impairs, diminishes, falsifies, scales, or lightens any of the coins coined at the Mints of the United States.” This statute means that you may be violating the law if you change the appearance of the coin and fraudulently represent it to be other than the altered coin that it is. As a matter of policy, the U.S. Mint does not promote coloring, plating or altering U.S. coinage: however, there are no sanctions against such activity absent fraudulent intent. “
This means, as long as you don’t try to claim a half-dollar as a piece of currency other than a half-dollar, it’s legal.
REFERENCE: US Treasure Dept Website. (FAQ – section)