This is from Wikipedia. The unit listed on this coin is one of the oldest in the country.
The tradition of a challenge is the most common way to ensure that members are carrying their unit's coin. The rules of a challenge are not always formalized for a unit, and may vary between organizations. The challenge only applies to those members that have been given a coin formally by their unit. This may lead to some controversy when challenges are initiated between members of different organizations and is not recommended. The tradition of the coin challenge is meant to be a source of morale in a unit, and forcing the challenge can cause a reverse effect.
The challenge, which can be made at any time, begins with the challenger drawing his/her coin, and slapping or placing the coin on the table or bar. In noisy environments, continuously rapping the challenge coin on a surface may initiate the challenge. (Accidentally dropping a challenge coin is considered to be a deliberate challenge to all present.) Everyone being challenged must immediately produce the coin for their organization and anyone failing to do so must buy a round of drinks for the challenger and everyone else who has their challenge coin. However, should everyone challenged be able to produce their coin, the challenger must buy a round of drinks for the group.
While most holders of challenge coins usually carry them in their pockets or in some other readily accessible place on their persons, most versions of the rules permit a challenged person "a step and a reach" (particularly useful if one is challenged in the shower, a tradition in the Navy).
Variants of the rules include the following. If you are able to steal a challenge coin, everyone in the group must buy you a drink. During a challenge, everyone in the group must buy you a drink if you are the holder of the highest ranking coin. Some units provide strict time limits to respond to a challenge
I bet that chief was upset when he realized he lost that. I know many a chief that take their coins extremely serious.
We all had coins in the Marines, but we would try to get one from a higher rank than someone else. In other words, every so often a Marine would pull out a coin and slap it on the table/bar. It was kind of a race too. Last one to draw a coin had to buy a round. The Marine with the lowest rank coin had to buy a round. Forunately I was given a coin by Lt. Gen Hagee, who then became the Commandant of the Marine Corps. At the time he was the commanding officer for the 1st Marine Expiditionary Force. Needless to say that when I was around, and some others with commanding general coins, no one challenged. Although, I was caught many times without my unit coin.