Korea’s Gambling and Gaming Woes

It hasn’t been much talked about here in the West, unless you read Steven Davis’ excellent PlayNoEvil blog. But South Korea has been caught in the grip of a huge scandal involving games and gambling.

The very very short form of it is that “Sea Story,” a chance-based game that paid out in “tickets” that were sponsored by the government and intended to be used for access to cultural sites and events, was hacked by some operators so that it would pay out more tickets than it was supposed to. Steven has some metrics on the magnitude of the scandal:

First, some PC bangs (internet cafes) have been using gift certificates as payouts for illegal slot machines. The legitimate PC bang business has been hit hard by intense competition and the rapid growth of broadband in individual homes. This has led many to move into the illegal slot machine business. The number of PC bangs has declined from 24,000 in 2004 to around 20,000 in September.

A sample PC bang that was operating as an illegal gambling business was shut down in September and reopened in October under a new name.

The slot scandal has been centered around a slot machine that pays out gift certificates called “Sea Story”. Sea Story earned $15 Billion (dollars, not won) annually for the arcades that operated it and the total gift certificates (the mechanism for gambling) paid out in Korea was $31.5 Billion.

The tickets developed into a classic “alternate currency” that could be cashed back in, this creating incredibly widespread gambling. This of course resulted in much bribery for licenses to operate arcades with this game and others, and plenty of accusations of influence peddling. A tax evasion probe started on the maker of the game. And the scandal on who approved the game, the changes, or turned a blind eye to the whole thing reached well into governmental offices, reaching the President’s nephew. The Korean equivalent of the ESRB, the KMRB, came under scrutiny, and state agencies were raided.

Now the latest development: as the Korea Times reports, under tough new restrictions going into effect October 29th, the government is telling “Gaming Arcades to Shut Down After Midnight.”

According to new regulations going into effect Oct. 29, which were announced after a Cabinet meeting chaired by Prime Minister Han Myeong-sook yesterday, business hours at establishments providing gambling games, which include computer rooms and karaoke bars with game machines, will be limited to the hours between 9 a.m. and midnight.

Authorities will not limit the operating hours of gaming outlets that provide content for all ages.

Computer rooms providing Internet-based gambling games and adult-only content will be required to put a warning message on the game’s initial page or on the package of the software and install programs to block access by underage users.

As one would expect, there’s plenty of thought that large-scale illegal gambling like this is controlled in part by gangs and organized crime such as the “Chilsong” crime groups of Pusan. When police came to arrest Kim Min-Seok, head of the Korea Computer Game Industrial Association, he threw his cell phone and USB sticks out the window of his 36th floor apartment (way to look guilty, dude…). Over 100 public officials and businessmen have been banned from traveling while under investigation.

All in all, it’s a huge ugly furball of a mess, and particularly interesting when set in contrast to the recent legislation on Internet gambling here in the US.