US mutton consumption was largely a by-product of the wool industry. During the colonial period (i.e., before the War of Independence), wool production was small-scale and local, often for the household's own use. This led to occasional mutton consumption, as sheep grew too old for efficient wool production, but this mutton - from quite old animals - was not what we would consider prime mutton. Sheep could be raised purely for meat (and were), in which case they would be slaughtered relatively younger, especially if male. However, cattle and pigs could often provide cheaper meat (and beef could be a byproduct of the leather and dairy industries), and wool was an important motive for sheep-raising. This largely non-commercial wool industry was partly a result of British economic policy: preserve British exports by preventing colonial competition. (Similarly, Spain largely destroyed a starting-to-be productive and successful olive oil industry in Mexico.)

With the bulk of local wool production going into coarse homespun cloth for home use, where did fine woollen cloth for the commercial market come from? From Britain, of course, as was the British plan. The decade before the Revolution, as discontent with British policy grew, saw efforts to increase and improve American sheep herds. (George Washington was involved in this, on the sheep-breeding side of things.) As the war began, this became even more important.

The number of sheep killed for meat fell, as the size of herds was increased as much as possible. Commercial wool production increased, and patriots wore coarse homespun instead of imported British cloth.

There was no strict moratorium, but eating mutton could easily have been seen as unpatriotic. Virginia passed a resolution that sheep were not to be killed for mutton unless necessary, and then the worst animals (for wool production) were to be killed. No fancy mutton in Virginia for the duration of the war!

After the war, efforts to increase wool production, and commercial wool production continued. The early 19th century saw the beginning of sustained and major growth in commercial wool production, with imports of Spanish and French merino sheep to improve sheep stocks for better wool production. This growth meant that mutton became much more available, even if only old animals were killed. The mid-19th century saw a westward shift of the wool industry, and eastern sheep-raising focussed on mutton breeds than the merino-improved wool breeds. Mutton was back on the menu, big-time!

References

An overview of the American sheep industry:

• L. G. Connor, "A brief history of the sheep industry in the United States", Agricultural History Society Papers 1, pp 89, 91, 93-165, 167-197 (1921). https://www.jstor.org/stable/44216164

Virginia mutton resolution:

• Sandra L. Oliver, Food in Colonial and Federal America, Greenwood, 2005.