From the FAQs:
- Why are the rules and color restrictions so arbitrary?
While we appreciate the artistic restrictions of the original gameboy, we are more interested in encouraging an interest in the platform than requiring entrants to code assembly or making functional ROMs. This is an open jam for all participants, both advanced and beginner. As such, the restrictions are arbitrary to encourage creativity, and not a definition of actual gameboy functionality.
Basically: it's four colours for aesthetic purposes and it's been that way for over a decade.