This color change was the creation of Frank Ward Cloyes. It was marketed in England by Ellis Stanyon as “Cloye's [sic] Colour Change,” 1910, and in the U.S. by Read & Covert as “The Prismatic Cards (Cloyes' Changing Cards),” 1910. It was the same technique used today, but employed a double-faced card to allow cleaner displays.
After that, many people muddied the waters by claiming the move as their own.
The month after “Cloye's Colour Change” appeared on the market, Stanyon taught the change in Stanyon's Serial Lessons in Conjuring, No. 20, July 1910, p. 5, but did not mention Cloyes, claiming the sleight to be his own invention. What is damning to Stanyon's claim is that he called it “A New Colour Change” in the lesson itself, but slipped in calling it “Cloye's Colour Change” in the advertising for the lesson (see Magic, Vol. 10 No. 10, July 1910, p. 80).
Stanley Collins later contributed an ungimmicked version to Magician Monthly, Vol. 8 No. 6, May 1912, p. 90. There it is titled “Original Colour Change”. He later submitted a clearer explanation of it to Pentagram, Vol. 1 No. 10, July 1947, p. 70, calling it the “Paint Brush Colour Change”. In his handling, the rear card of the pack is stolen behind a Joker that lies on the front of the deck, to create a double card, which is then passed over the face of the pack and the rear card is left behind to effect the change.
The version of the change that has long been the common handling, in which two cards are gripped as one at their inner ends before brushing them across the top of the deck, was published by Frank Holmes as “The Brush Colour-Change” in The Magical World (New Series), No. 5, July 2 1913, p. 75. Holmes claimed it was “only…slightly different from others.”
Two versions of this color-change are given in Glenn Gravatt's Encyclopedia of Self Working Card Tricks, 1936, p. 393. Gravatt gives no attribution, but Jean Hugard, in his revision of Gravatt's book, repeats the second version and credits it to Jack Merlin (p. 341). These handlings involve a triple card, with cards preset face down and face up, which are drawn from the bottom of the deck as a single card and are brushed over the face-up top card to effect the transformation.
Another variant is described by Walter Gibson in The Sphinx, Vol. 17 No. 11, Jan. 1919, p. 216. It uses an inverted technique: Instead of passing a double card over the deck and coming away with a single card, the performer passes a single card over the deck and comes away with a double card. Gibson opines that this method of stealing a card to effect a change is inferior to that of depositing a card to accomplish the same result. Nevertheless, Dai Vernon used this inverse technique in his “Ambitious Card” routine from Stars of Magic, Series 5 No. 2, 1949, p. 77 of the 1960 compilation book.
To add yet one more name to the list of proposed inventors, Jeff Busby credits the move to Neal Elias in Arcane, No. 14, 1995, p. 203. Busby gives no citation for this attribution, but it's clear it couldn't have been before Cloyes, since Elias was born in 1921.
A related change was developed around the same time as Cloyes's change. It, too, used a paintbrush action on the face of the deck, but the method to accomplish the change was entirely different. It was published by M. F. Crowe as “The Artist Card” in The Sphinx, Vol. 9 No. 5, Oct. 1910, p. 175.