Contributed By Kim & Chang
The Game Industry Promotion Act (the “Game Industry Act”) was enacted in 2006. In December 2020, a comprehensive amendment bill (the “Amendment Bill”) that includes new and stricter regulations was introduced to protect game users and prevent speculative activities.
The material terms of the Amendment Bill include:
The Amendment Bill is currently under discussion among key government agencies related to games, and the National Assembly held a public hearing in February 2022. However, the Amendment Bill may be further updated considering the recent emergence of new types of games, such as games using metaverse, blockchain and cryptocurrency. Significant changes are expected to be made to Korean gaming law if the Amendment Bill passes the National Assembly.
The following two types of shutdown systems exist in Korea.
In November 2021, the National Assembly approved a bill to abolish the Mandatory Shutdown System, and thus, only the Selective Shutdown System remains at this time. However, additional changes may follow since there are ongoing discussions on the Selective Shutdown System.
Under Korean gaming law, whether certain games are permitted, prohibited or restricted is not specifically determined by the game type or genre, but instead is determined by whether there are speculative activities (ie, can be considered gambling). In general, real-money betting is prohibited, and bingo, casino, lotteries and fantasy sports are often prohibited because of their speculative elements.
Under the Game Industry Act, a speculative game refers to a game that:
Furthermore, according to the Act on Special Cases Concerning Regulation and Punishment of Speculative Acts, Etc (the “Speculative Acts Regulation Act”), a “speculative act” is “an act of causing profit or loss of property by collecting property or monetary gain from many persons and determining the profit or loss by coincidental means”.
Korean court precedents also consider two major factors in determining if a game involves speculative activities:
Games with speculative elements are prohibited under the Game Industry Act, the Speculative Acts Regulation Act and the Korean Criminal Code, and relevant conduct is punishable by imprisonment or a criminal fine.
Therefore, regardless of the type, games will be evaluated on a case-by-case basis for speculative activities, and the Game Rating and Administration Committee (the GRAC) may refuse to provide an age rating or cancel a previous rating for the game. Even if there is no element of real-money betting or monetary gain, it is often the case that the game receives an 18+ rating when it is determined to be speculative, such as when it is similar to gambling or includes betting on goods within the game. In addition, as the GRAC tends to determine whether a game is speculative based on stricter standards than those by the courts, games need to be reviewed on a case-by-case basis as they may be subject to rejection of rating on the grounds of their speculative nature.
The GRAC’s age rating categories are as follows:
The distribution of games without an age rating is punishable by imprisonment for up to five years or a fine. Among the games rejected for game ratings, speculative games account for the largest portion.
Korean gaming laws generally do not differentiate between online gaming and land-based gaming, and the same rules for speculative games apply as those set out in 2.1 Online. There are certain land-based gaming licence requirements for internet cafes (ie, a PC bang, which is a gaming centre in which patrons can play multiplayer games for a fee) and casinos, which are further discussed in 5.1 Premises Licensing.
Sports betting, which is regulated by the National Sports Promotion Act, is permitted for a number of sports, including domestic and international football, basketball and golf. Sports betting is only allowed at facilities that are exclusively operated by the Korea Sports Foundation.
The Game Industry Act generally applies to all types of games. The Korean Criminal Code and the Speculative Acts Regulation Act also apply to games with speculative elements.
As mentioned in 2.1 Online, the Game Industry Act and the Speculative Acts Regulation Act regulate the scope of prohibited games (eg, gambling) for being "speculative" in nature. Furthermore, gambling is punishable under the Korean Criminal Code.
Although the Korean Criminal Code does not provide a specific definition of “gambling”, the Korean Supreme Court has defined “gambling” as an act of achieving monetary gain or loss through the wager of property on a game or activity based on chance; eg, the Supreme Court held that golf betting games constitute gambling, because even if an individual golfer’s skills affect the winning or losing outcome, there is still an element of chance.
The Korean Criminal Code prohibits all forms of gambling and lotteries, and their business operations, with the exception of certain types of permissible betting activities pursuant to separate legal provisions. Therefore, a game with gambling content may be punishable under the Korean Criminal Code as a form of gambling.
See 3.2 Definition of Gambling for a general definition of gambling.
However, casinos and internet cafés require certain licences for operation, as specified under 5.1 Premises Licensing. Under the Tourism Promotion Act, licensed casinos are not allowed to permit the entrance of Korean nationals, with the exception of a facility in Gangwon Province.
Korean gaming laws do not differentiate between online gambling and land-based gambling. See 3.2 Definition of Gambling for a general definition.
Key offences include unlawful gambling and habitual unlawful gambling under the Korean Criminal Code, and unlawful speculative activity under the Speculative Acts Regulation Act.
Unlawful gambling is generally regulated by the Korean Criminal Code. According to Article 246 of the Korean Criminal Code, unlawful gambling may be punished by a fine not exceeding KRW10 million, and habitual unlawful gambling is subject to imprisonment for not more than three years or a fine not exceeding KRW20 million.
According to Article 30 of the Speculative Acts Regulation Act, the operation of a business with speculative activity without obtaining prior permission (ie, a licence) is punishable by imprisonment with labour for not more than three years or by a fine not exceeding KRW20 million.
See 1.1 Current Outlook. In addition, as mentioned in 12.5 Blockchain or Cryptocurrency, there are ongoing discussions and proposed bills on whether games using blockchain or cryptocurrency technology are subject to gambling regulations.
The MCST and the GRAC are the key regulatory authorities applicable to the gambling sector.
The Korean government adopts a prescriptive approach to regulation. Games that are not permitted, such as speculative games, are set out in advance and specific licences and age ratings are required for gaming business operators to provide or distribute games.
See 1.1 Current Outlook. In Korea, different regulations apply to rating classification and anti-immersion measures depending on game platforms (eg, mobile, PC, console). As cross-play, which can be played simultaneously on various platforms, has become more common, the MCST has announced its plan to introduce an integrated rating system. While no specific plan has been established yet, a change in the regulatory system remains a possibility.
For gaming business operators to provide or distribute games through their own channels, the following licences are required:
For in-app purchases or any relevant sales regarding games, an online retailer report is also required.
Games distributed in Korea are subject to age rating requirements, and must obtain a rating from the GRAC or a self-rating entity (eg, Google, Apple) before release. However, 18+ games must be rated by the GRAC. For games registered with the GRAC, an amendment report on the modification of gaming content is required within 24 hours of the implementation of such changes. After reviewing the changes, the GRAC determines whether a different age rating is required within seven days and notifies the gaming business operator.
Game manufacturer, publisher registration and value-added telecommunications business report licences are readily available. There is no statutory limit on the number of licences.
While there are no restrictions under the applicable laws and regulations, in practice, it is difficult for overseas business operators to obtain certain licences, including game manufacturer and publisher registration licences.
Furthermore, age ratings by the GRAC are scrutinised and determined on a case-by-case basis by the GRAC.
There is no set duration of the licences and the relevant laws are silent regarding an expiry date.
However, as mentioned in 4.3 Types of Licences, amendment reports on changes to gaming content must be filed with the GRAC within 24 hours of the change.
As mentioned in 4.5 Availability of Licences, it is often recommended for overseas gaming business operators to establish a local entity (or a local subsidiary) because, in practice, it is difficult for them to obtain certain licences.
Through a local entity, overseas gaming business operators must obtain a business registration certificate for their gaming services. Either of the following is possible, depending on a gaming business operator’s game release schedule:
As a separate matter, overseas gaming business operators without a local entity will not have a tax identification number in Korea.
The processing period for game manufacturer or publisher registration licences is three days, and for a value-added telecommunications business report licence, the processing period is within three hours on a business day.
The processing period for a business registration certificate is around three days, and around two days for amendments.
The application fee for a game manufacturer or publisher registration licence is KRW30,000.
There is no application fee for a value-added telecommunications business report licence or a business registration certificate.
There are no separate annual fees for licences.
Internet Cafés (ie, Venues that Provide Internet Computer Games)
Internet cafés – defined as businesses that make gaming products available to the general public with necessary infrastructure, such as computers – are required to register for a licence as a provider of internet computer game facilities.
Land-based casinos not located in Jeju Island are subject to the Tourism Promotion Act and the Casino Business Rules of the MCST. However, more than half of the casinos in Korea are currently located in Jeju Island and a separate Ordinance on Management and Supervision of Casino Business in Jeju applies. These rules and regulations are much stricter than the rules and regulations for non-Jeju casinos.
For a casino business licence, the casino must be a part of an ancillary facility to a tourist hotel or international conference facility, or a passenger ship of a certain size that travels between Korea and foreign countries. According to the Ordinance on Management and Supervision of Casino Business in Jeju, casinos in Jeju Island must be at a five-star hotel business facility located in an area where foreign investments are made.
Video Game Arcades
Any business that provides gaming products for public use (including juveniles) with necessary facilities at a certain physical location is required to register for a licence as a juvenile-game-providing business.
Businesses With Speculative Activities
Any business that makes speculative activities available to users needs to meet certain facility requirements – eg, the inside of the facility is not visible from the outside – and receive permission for business operation from the province or city police department.
Due to COVID-19 and concerns over physical gatherings at entertainment-related facilities, casinos in Korea have argued for the permission to start online betting. The MCST is reviewing such proposals, but currently there are no notable changes or legislative motions.
As mentioned in 2.1 Online, in principle, speculative online gambling is prohibited. Therefore, on the premise that the online gambling is not speculative, game manufacturer, publisher registration and value-added telecommunications business report licences can be considered B2C licences.
Game manufacturer and publisher registration licences can be considered B2B licences. A game publisher licence is required to distribute any gaming content manufactured overseas within Korea.
There is no specific regulation regarding affiliates.
There are no specific licensing or regulatory requirements regarding the use of white-label providers.
There are no recent or forthcoming changes to online gambling.
There are technical measures for unlawful gambling, including IP blocking. The Korea Communications Commission (KCC) is known to block access to non-Korean websites that enable unlawful gambling.
As mentioned in 3.5 Key Offences, unlawful gambling is subject to criminal punishment.
Under the Game Industry Act, gaming business operators, with limited exceptions, are required to take measures to prevent game addiction. Such preventative measures include:
Gaming business operators are also required to set limits for responsible gambling, including monthly payment limits, to receive age ratings.
There is no applicable information in this jurisdiction.
As mentioned in 2.1 Online, in principle, online gambling with “speculative” nature is prohibited. See 7.1 RG Requirements regarding game-related management tools that do not fall under speculative online gambling.
The Financial Services Commission (FSC) considers illegal gambling and speculative activities as major threats to financing in Korea. General Korean AML legislation applies to the gambling sector. The key pieces of AML legislation are:
The FTRA regulates money-laundering activities carried out by way of financial transactions by establishing a reporting scheme to enable the analysis of certain information relating to financial transactions.
The Korea Financial Intelligence Unit (KoFIU) was established as the primary national agency responsible for the regulation of AML operations and the control of suspicious transactions in order to effectively implement the AML system. The KoFIU is also responsible for establishing AML policies, the implementation of such policies, and the education of subject entities.
There is no applicable information in this jurisdiction.
Obligations under the FTRA apply to casino operators, as well as financial institutions, electronic financial business operators (eg, money transmitters, payment gateway service providers and issuers of prepaid electronic payment means) and certain loan business operators.
Under the FTRA, the above entities are required to:
There are also reporting requirements under the FTRA and the following cases must be reported without delay to the KoFIU:
The POCA prohibits any person from receiving criminal proceeds or assets that originated from crime proceeds while such person has knowledge of the criminal nature of the proceeds or assets.
Anyone who transacts with a person on the financial transaction prohibited list announced by the FSC without an approval by the FSC may be punished by imprisonment for up to three years or a criminal fine of up to KRW30 million. For violations committed by its representatives, officers, employees or agents during the course of its business, the employer may be held criminally liable and punished with a criminal fine of up to KRW30 million (for anyone who conceals criminal proceeds) or a fine of up to KRW20 million (for anyone who receives criminal proceeds while having knowledge of the criminal nature of the proceeds).
Anyone who conceals criminal proceeds may be subject to imprisonment for up to five years or a criminal fine of up to KRW30 million.
Anyone who receives criminal proceeds while having knowledge of the criminal nature of the proceeds may be subject to imprisonment for up to three years or a criminal fine of up to KRW20 million.
The GRAC and the Korea Fair Trade Commission (KFTC) regulate false or misleading advertising.
The general definition of advertising applies to gaming laws. According to the Fair Labelling and Advertising Act (FLAA), “advertising” means any public distribution or presentation of matters concerning a product through various methods, including newspapers, online newspapers, periodicals, broadcasting and telecommunication.
Under the Game Industry Act, all games, with limited exceptions, have disclosure requirements and must indicate their age rating, content information according to descriptors defined by the GRAC (eg, sexuality, violence, language, gambling) and the name of the game manufacturer or publisher.
The Game Industry Act prohibits certain game-related advertisements and promotional materials regarding age ratings and speculative activities, including advertisements with content that is different from the disclosed information.
The following advertisements or promotional materials are prohibited under the Game Industry Act:
Furthermore, the FLAA generally prohibits false, exaggerated or misleading advertising, and is hence applied to unfair advertisements, such as those in which there is a false indication of the probability of random events in the game.
The MCST may order the removal of the advertisement or promotional materials as a corrective measure. Gaming business operators can be subject to an administrative fine not exceeding KRW10 million for such charges.
If the mechanism of paid loot boxes is advertised differently, the KFTC may raise issues about false, exaggerated or misleading information on the odds or other information and impose a corrective order or an administrative fine.
There is no applicable information in this jurisdiction.
There are no specific disclosure requirements for acquisitions or changes of control of gaming and gambling companies; instead, general rules on merger control in Korea apply. A company with assets or revenues of KRW300 billion or more, if the assets or revenues of the target company are KRW30 billion or more, is required to file a business combination report to the KFTC. Listed companies are obligated to disclose acquisitions and change of control.
There are no separate change of corporate control triggers for gaming and gambling companies. As mentioned in 10.1 Disclosure Requirements, general rules apply and change of control triggers would include assets or revenues standards.
There are no passive investor requirements regarding acquisitions or changes of control of gaming and gambling companies.
Regulatory bodies – as mentioned in 2.1 Online, 3.5 Key Offences and 9.5 Sanctions/Penalties – can enforce criminal punishment or a fine.
Under the Game Industry Act, a gaming business operator with a game manufacturer or publisher registration licence may be subject to business suspension (for a period of up to six months) or business closure for several violations, including:
Most of the financial penalties under the relevant laws and regulations, including the Game Industry Act and the Criminal Act, are determined within the statutory limits, taking into account the seriousness of the violation and number of violations. On the other hand, administrative fines may be imposed in case of violation of specific laws such as the Fair Trade Law, the Fair Labelling and Advertising Act or the E-Commerce Act, which are calculated by multiplying a certain percentage of the revenue related to the violation. The KFTC has a history of imposing administrative fines for unfair business practices, including false or misleading advertising.
In principle, game-related sanctions (eg, sanctions for failure to obtain a license or a violation of game-related regulations) are imposed on gaming business operators.
However, if an individual violates the law while operating the game business on their own (eg, individual business operator), a sanction may be imposed on that individual. In addition, some laws, such as the Game Industry Act and the Fair Trade Law, allow punishment to be imposed on an individual who has been actively involved in a corporation's violation of laws (eg, relevant officers or employees).
On the other hand, it is rare for personal licensees of a game to be subject to sanctions even if the game is in violation of the relevant laws. For example, even if a business operator does not obtain a license or game rating necessary for the game business, a personal licensee's use of the relevant game would not be subject to sanctions. However, there is an exception in the case of unlawful gambling games, as users of such games may be subject to punishment along with the operator of gambling games (see 3.6 Penalties for Unlawful Gambling).
There are no notable recent trends for social gaming.
There are no notable recent trends for esports.
Although the GRAC generally does not give age ratings for fantasy sports, there is growing controversy on whether fantasy sports constitute speculative gaming.
There are no notable recent trends for skill gaming.
Generally, the GRAC does not rate any P2E (play-to-earn) games, including blockchain or cryptocurrency games, and has recently cancelled ratings for blockchain games (“GRAC’s disposition”) on grounds that blockchain technology enables easy exchange and transactions outside of games, which, in turn, can result in high risks of speculative use. Since game services must be suspended if (i) they do not receive ratings or (ii) their ratings are cancelled, the relevant gaming companies filed administrative lawsuits and an injunction against the GRAC for the GRAC’s disposition.
Since there are ongoing lawsuits and the lawsuit on the merits has not been decided yet, the possibility of servicing P2E games using blockchain or cryptocurrency technology remains unclear. With respect to preliminary injunction lawsuits to suspend the effect of the GRAC’s disposition, the Seoul Administrative Court recently rendered conflicting decisions by granting and dismissing the preliminary injunction, and thus, the possibility of suspending game services is also unclear.
Furthermore, there are active legislative discussions on how to regulate P2E games using blockchain or cryptocurrency technology.
There are no separate tax rates for gambling, and the general corporate income tax in Korea will apply.
For reference, casinos licensed under the Tourism Promotion Act are required to make payments to promotional funds for tourism.
See 1.1 Current Outlook.