this is chromatic aberration, an effect usually the result of a poorly set lens. however, seeing as the fake date they give for the game is in the early 30s (1931?) and the game is presented in color, the cartoon would have been likely shot in Technicolor, who had a 3 strip printing process at the time. we can go far enough with this info to say that the print that we’re viewing is some leftover junker that had the strips misaligned during printing and that also you can turn the effect off in the options screen
also film can be real grainy and that’s not bad, better than washing it away like certain restorations
edit: it should be noted that when chromatic aberration is usually employed by a 3D, “realistic” looking game, it is in the pursuit of fooling our brains as introducing artifcats and whatnot can take things out of the uncanny valley. some games just go overboard with it, film influence or no