My son has had playstations and x-boxes. Although I'm a single mom, I wouldn't consider my home dysfunctional. As a matter of fact, my son's half brother, who is 18 years older, got him a game for his birthday without really thinking. My son, who was a bit younger than yours is now, had heard of the game and made the decision on his own to return it and trade it in for something else without even opening it. That's pretty responsible, if you ask me.
Not all games are violent or bad. My friends had one for their kids that came with little bongos and you played music along with animated monkeys or apes or whatever they were. The kids had a blast with it. Their oldest kid was in high school and she played right along with the little kids. They laughed their heads off. I'm just saying that there ARE games the whole family can have fun with.
As for your son's friends making fun of him, they may rib him a bit. OR, it could be your son's perception. I know my daughter bugged me about getting a cell phone and told me that her friends all made fun of her for not having one. I knew her friends....they didn't make fun of her. SHE felt like an oddball for not having what her friends had. Understandable, but I still didn't run out and get her a phone.
I totally agree that some parents let their kids play games that are inappropriate for their ages or are too violent in content. I'm sure there are plenty of kids at your son's school who play games of all kinds and until recently, your son hasn't been allowed to play ANY.
He probably does feel a bit left out.
Maybe you can find a happy compromise.
I never had a problem with my kids being addicted to video games, but I know a few parents whose kids threw fits over time restrictions, etc. They got rid of the game systems because their young kids wanted to do nothing else. It became a problem.
Different kids have different tolerances and different families have different rules.
I don't think you should tell your son you don't "care" if his friends make fun of him. He can get different friends or use the classic I always told my kids to use....Blame Mom! "Tell your friends I don't believe in it, I don't allow it. I don't care if I'm not the 'cool' mom, take the pressure off of you and blame it all on me. You have my permission".
You'd be surprised how many times my kids used that one to get out of doing things they didn't WANT to do in the first place. "Sorry, my mom won't let me".
As your kids get older, there will certainly be more "pressures" about things.
Kids have to learn to navigate. It really is okay not to do everything your friends do, but it can take a while to come to that acceptance.
Best wishes.