The Joker proposes a radical solution to Arkham Asylum's dire situation - gladiatorial combat. Dr. Arkham reluctantly agrees to relieve the tension caused by dwindling supplies and a lack of staff members. He assigns the guards to handle the patients' medication which Joker has manipulated.
Dr. Arkham stumbles upon a staff member's corpse thought to have abandoned the asylum and finds out his keys are missing. The fight begins with Pinhead and Killer Croc who is dosed with stimulants. Inmates begin to start betting on the outcome of the match. When the dust settles, Killer Croc emerges victorious. He goes on a rampage catching the staff off guard.
In the chaos, the inmates seize control and take Dr. Arkham hostage. They demand that he be tortured but the Joker disperses them with a water hose. With Pinhead out of the way, he picks his beef with Wax Man. The Arkham staff regains control of the situation.
With the keys stolen by Joker, Dr. Arkham decides to lock up all inmates in the gym. Dissent grows among the staff with some of them deciding to leave. The doctor locks himself in his office not knowing that the inmates have broken out of the room.