If you have our Pennies from Heaven with a cross cut out of them, you may have been asked the same thing. Everyone has an opinion and there is a lot of misinformation on the web about this, so to clear this up we went directly to the source - The U.S Treasury, to get the answer.
"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. " Excerpt taken from https://www.treasury.gov/resource-center/faqs/Coins/Pages/edu_faq_coins_portraits.aspx
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. The law is requiring both items (fraudulently + deface) to qualify for violation, not just altering.
The key word is “fraudulently.” Basically you can’t make it something it’s not, like whittling down a penny to be the shape of a dime and inserting it into coin machines to get a 10 cent credit. In the case of our Pennies from Heaven it is still a penny, an altered penny.