From the American Legion:

"Records indicate that fringe was first used on the flag as early as 1835. It was not until 1895 that it was officially added to the national flag for all regiments of the Army. For civilian use, fringe is not required as an integral part of the flag, nor can its use be said to constitute an unauthorized addition to the design prescribed by statute. It is considered that fringe is used as an honorable enrichment only. (Military tradition)

The courts have deemed without merit and frivolous, lawsuits that contend that the gold fringe adorning the flag conferred Admiralty/Maritime jurisdiction."