Origins
Every penalty is, at its root, a payment. The word descends from Latin poena — 'punishment' — borrowed from Greek poinḗ, which meant something very specific: blood money. In early Greek society, when someone killed another person, the victim's family could demand poinḗ — a ransom, a financial settlement to end the cycle of revenge.
The Proto-Indo-European root *kʷoinéh₂ meant 'payment' or 'compensation'. Justice, in this ancient framework, was transactional. You harmed someone; you paid. The concept evolved from financial restitution into broader punishment, but the economic logic never fully disappeared. Modern penalties — fines, damages, penalty clauses in contracts — still treat wrongdoing as a debt.
The Latin poena produced a remarkable family in English. Pain is the sensation of punishment. Penal relates to the punishment system. Punish comes from Latin pūnīre, derived from poena. Penance is punishment you impose on yourself. Subpoena is Latin sub poena — 'under penalty' — meaning a court summons you ignore at your own cost.
Old English Period
Even the verb pine (to suffer from longing) descends from the same root, through Old English pīnian, 'to torment'. To pine for someone is to pay the emotional penalty of absence.
The football penalty kick, introduced in 1891, brings the word full circle: a punishment for a foul, settled with a single shot — the modern equivalent of blood money.