It has been three months since the chaos of the Tetch virus took over Gotham. The city seems to have calmed down and crime is under control. Penguin is enforcing his new system to bring down crime in Gotham. He has created "licenses," which means that all crime is being regulated through Penguin. Penguin has the Mayor and the Commissioner in his pocket.
Bruce is continuing to foreshadow his future identity to us. He intervenes and stops a robbery but is cut short due to a Penguin license. He is also unaware that Ra’s Al Ghul is watching him from a distance. Bruce tells Alfred he feels responsible for the release of the Tetch virus and wants to bring Penguin down. He wants to be ready when Ra’s Al Ghul returns.
The Merton gang are criminals who don’t agree with the Penguin licenses. They attempt to rob a wedding reception but are interrupted by Penguin’s right hand man…Victor Zsasz. He explains the new regulations to them and puts out a warning for crossing Penguin. The gang has a plan. They go to Arkham Asylum and find Jonathan Crane. He has been infected by his father’s toxin and brings out his horrible fear of scarecrows. He has even drawn a giant scarecrow on the floor. They want to use him to make his father’s fear toxin.
Jim is obviously against Penguin’s new licensed crime regulation and is causing problems (as usual). Bullock is also concerned about Penguin’s licensed crime but his hands are tied. The concern is if Jim will comply with the new order. We all know Jim Gordon will not let this stand. The Merton gang robs Gotham Federal Bank and uses some of the Crane fear toxin. Jim and Bullock investigate and Jim quickly remembers Jonathan Crane and that the Merton gang are sending Penguin a message.
Bullock and Jim go find out information about the Merton gang and Jonathan Crane. They go to an apartment and are attacked by Merton, Grady and the rest of the gang. They tell them they want to go against Penguin.
Selina has developed a strong new relationship with Tabitha. Selina is also learning some new skills to defend herself. They are paid a visit by Victor Zsasz who informs them of Penguin’s new licensed crime regulation. They tell Victor they agree, but it seems obvious this is fake and they want no part of this new Gotham.
Penguin is preparing for the opening of the Iceberg Lounge. We also see his old nemesis, The Riddler still frozen in the middle of his club. Penguin lies and tells everyone that The Riddler is sick. Jim confronts him and tells him he is a fraud and warns about Merton and his gang. He tells Penguin he is going to take him down. Penguin says he will crush Merton and his gang.
It is time for the opening of the Iceberg Lounge. The Merton gang is preparing their attack with the fear toxin. Ivy and Penguin are still working together. Jim and Bullock are preparing to intervene at the club. Jonathan’s fear level is through the roof.
Bruce and Alfred attend the opening of the club and he confronts Penguin about his licensing regulation. He also spots Selina and has a conversation on the roof with her. They still have some tension between them.
Penguin confronts the Merton gang as they attempt to crash the party. He wants to publicly humiliate them and kill them. Ivy appears to not agree with the new way Penguin is handling things. She kills the power to the club and then the chaos breaks out. Jim and Bullock arrive as the fighting start. Penguin gets hit with the fear toxin and sees horrifying images of his greatest fear…The Riddler. Jim takes down and arrests Merton before the party really gets out of control.
Merton is in jail and Jim tells Bullock that they need to find out where Jonathan Crane is. The man who keeps the regulation list for Penguin is visited by Vigilante Bruce. He takes the list and in another attempt to practice his watch, falls through the glass and gets confronted by the GCPD.
Merton’s friend Grady returns to the apartment to find Jonathan Crane so they can use the fear toxin to get Merton out. He finds out that Jonathan Crane isn’t there anymore. The Scarecrow is alive! He sprays the fear toxin right in Grady’s face. Gotham’s greatest fears are going to be unleashed!
Gotham airs Thursday nights at 8 p.m. only on FOX.