1868, in sports, "to disadvantage one competitor for a breach of the rules," from penal + -ize. The meaning "to make or declare (an action) legally punishable" is by 1879. Related: Penalized; penalizing; penalization.
The students were penalized for showing up late for class
pemmican
pen-
pen
penal
penalise
penalize
penalty
penance
Penates
pence
penchant