Yes, legally they can, without a doubt. It’s stupid, but their prerogative. The only way they could be compelled to accept the FRNs is if they provided the good or service first and allowed the other side of the transaction to have incurred a debt.
OK, got it.
The Feds are currently going the other direction, but they should bring back the $500. & $1K bills. The $100. isn’t what it used to be due to Fed inflation.