It has been considered "Legal" because it's never been contested but it's never been lawful, it's still on the books! no amendment has ever been made, anything can be made "legal" if some guy writes it on paper and it's signed by some other authority figure but that doesnt make it lawful.
It has been contested. Constitutional law if formed when something is contested on constitutional grounds, and it makes its way through the court system, usually up to the level of the Supreme Court. Once the Supreme Court has decided, then then that's it, unless there's a constitutional amendment, or the Supreme Court can be persuaded to revisit it. The constitutional legality of paper money was settled in a series of Supreme Court cases:
The most significant being the last,The Legal Tender Cases were a series of United States Supreme Court cases in the latter part of the nineteenth century that affirmed the constitutionality of paper money. In the 1870 case of Hepburn v. Griswold, the Court had held that legal tender in the form of paper money violated the United States Constitution. The Legal Tender Cases reversed Hepburn, beginning with Knox v. Lee and Parker v. Davis in 1871, and then Juilliard v. Greenman in 1884.
You may agree with Justice Field, but for all intents and purposes, a 8:1 supreme court decision, and subsequent usage, means the matter is settled short of a constitutional amendment.Juilliard v. Greenman, 110 U.S. 421 (1884), was a Supreme Court of the United States case in which issuance of greenbacks as legal tender was challenged in peacetime. The Legal Tender Acts of 1862 and 1863 were upheld.Julliard sold and delivered 100 bales of cotton to Greenman for $5,122.90. Greenman tendered $5,100 in United States legal tender notes and the rest in coin, but Julliard would not accept the U.S. notes. The tendered notes were originally issued under an act of Congress passed on February 25, 1862 and March 3, 1863, during the Civil War. An act of May 31, 1878 provided to “forbid the further retirement of United States legal tender notes”.
In an 8–1 decision, resting largely on prior court cases, the power "of making the notes of the United States a legal tender in payment of private debts" was interpreted as "included in the power to borrow money and to provide a national currency".
Justice Field dissented, challenging the court's interpretation of the terms to "borrow" and "coin" money.
He explained that the term to borrow money was well settled in other instruments such as municipal and corporate bonds, and private contracts. Allowing the government to make their notes legal tender would interfere with third-party contractual obligations as now third parties would be compelled by law to accept notes instead of coin. A private corporate bond could certainly not require an amusement park to accept the bond in exchange for entry. To find that the term to borrow money as written in the constitution allows interference in third-party contracts would certainly improve the value of the note, but it would deviate from the meaning of the term "to borrow money".
The meaning of the terms ‘to coin money’ is not at all doubtful. “It is to mould metallic substances into forms convenient for circulation and to stamp them with the impress of the government.” In the clause authorizing congress ‘to provide for the punishment of counterfeiting the securities and current coin of the United States’, a distinction is clearly made between debt and coin.
Justice Field also cited many quotes by the founders against paper money, including the following by James Madison: "The pretext for paper currency, and particularly for making the bills a tender either for public or private debts, was cut off."