US Code title 18, Part 1, Chapter 17 section 331 covers the alteration of US coins.  A little history:  when the US began minting gold coins, they did not have the reeded edges we now have on coins such as the quarter.  So, some rather enterprising folks started filing off gold from around the edges.  Then they would turn in the filed gold coins at one bank, get re-imbursed, then use that money to move on to buy more gold coins.  With enough patience, enough filings could be accumulated to sell.   Capitalism?   Hmmmmm!  Sounds like an "oops' doesn't it?  And so this code was passed. 

Following is the operative phrase:  "Whoever FRAUDULENTLY defaces, mutilates, impairs, dimishes, falsifies, scales, or lightens any of the coins coined at the mints of the United States......."  The caps for fraudulently are mine, for emphasis.  The concern is around fraudulent intent, not the act of alteration itself.  And so it is quite legal  to cut coins, as long as you are not attempting to defraud anyone.

And so coins of the US are cut smashed, elongated, and otherwise altered, and no one is going to jail.  You have seen the "penny presses" in rest stops on Parkways and Turnpikes, and of course at amusement parks.  Disney, naturally, raised the bar (at least financially) when they brought in quarter presses.  I think they about maxed out on that angle, not too many people carry around halves or dollars!

And so as you buy or wear your cut coin, fear not.  Although about half of the Secret Service agents work on protecting our money supply, none of them will be slapping you in cuffs and hauling you off to some Azkaban type prison to suffer in anguish for the rest of your life!