Sometimes referred to as coins, medallions or tokens, the practice of giving out a chip of some kind to mark a period of sobriety actually predates A.A.
Well before A.A. began, organizations such as temperance societies, gave out medallions or coins to people who pledged to quit drinking or for marking periods of sobriety. This common custom was taken up by individual A.A. groups as each saw fit. Eventually private companies began to make “A.A.” chips and began selling them to groups.
The AA history book Dr. Bob and the Good Old Timers, records that Sister Ignatia in Akron (a nun who famously helped early AA members), gave out medallions. From page 165: “Sister Ignatia gave each of her newly released patients a Sacred Heart medallion, which she asked them to return before they took the first drink. She would occasionally give out St. Christopher medals as well…”
As for giving out chips at certain anniversaries, that custom may have begun in
Nell Wing (Bill W.’s secretary) wrote this about the origin of the chip system:
…The chip system might have begun in Indianapolis…reference was made in a letter from Doherty to the start of giving out “chips” and “tokens.” This was in 1942. I imagine this would be about right, because most of the early groups started in 1940 and it would take about a couple of years to think of anniversaries and marking any time of sobriety. I asked Bill about this and his memory is that the system started in Indianapolis.
There is no codified system for giving out chips in A.A. What might be given out, how it is done and for what lengths of sobriety varies from place to place and even group to group. The periods of sobriety denoted by the chips are determined by their manufacturer. In most cases the medallions given out in A.A. are made by private companies which have no affiliation with A.A.
The term “chip” is often used because in many places it was or is common to use inexpensive colored poker chips to mark periods of sobriety.