A high school student who bought one USB drive has been sentenced to life in prison.
Six others who watched the show have been sentenced to five years of hard labour.
The students were punished under North Korea’s new “Elimination of Reactionary Thought and Culture” law.
The principal and teacher of the students were also dismissed from their jobs, and are likely to be moved to work in coal mines or rural areas.
The law places heavy punishments on watching, keeping or distributing media from capitalist countries.
Particularly harsh punishments are placed on shows, movies and music from South Korea and the US.
North Korean authorities believe that watching foreign material encourages their citizens to attempt to defect from the country.
Squid Game tells the story of a group of competitors forced to play deadly games in order to win a vast sum of cash.
The South Korean show is Netflix’s most watched series.
North Korean news site Arirang Meari pointed to the show as an example of the brutality suffered by people in capitalist South Korea.
“It is said that it makes people realise the sad reality of the beastly South Korean society in which human beings are driven into extreme competition and their humanity is being wiped out,” the site wrote.
North Korean propaganda is often focused on the notion that people in capitalist societies are poor, oppressed and miserable.