The American Heritage Dictionary of the English Language on sanction:

"Occasionally, a word can have contradictory meanings. Such a case is represented by sanction, which can mean both "to allow, encourage" and "to punish so as to deter." It is a borrowing from the Latin word sncti, meaning "a law or decree that is sacred or inviolable." In English, the word is first recorded in the mid-1500s in the meaning "law, decree," but not long after, in about 1635, it refers to "the penalty enacted to cause one to obey a law or decree." Thus from the beginning two fundamental notions of law were wrapped up in it: law as something that permits or approves and law that forbids by punishing. From the noun, a verb sanction was created in the 18th century meaning "to allow by law," but it wasn't until the second half of the 20th century that it began to mean "to punish (for breaking a law)." English has a few other words that can refer to opposites, such as the verbs dust (meaning both "to remove dust from" and "to put dust on") and trim (meaning both "to cut something away" and "to add something as an ornament")."