Billy the Kid and Fuzzy Jones frame a holdup of the stagecoach Fuzzy is driving in order to impress upon Senator Peabody, riding in the coach, that something must be done by the state legislature to stop the lawlessness. Also in the coach are Governor Arnold and his niece Mary, and Dirk Randall, the local banker who is the secret leader of the outlaws. With his henchman Ace Harmon, Randall schemes to kill one of his own gang, and frame Billy for the killing. Rufe picks a fight with Billy in the saloon and as they go outside into the alley, Randall fires a shot that kills Rufe. Billy is arrested by Sheriff Hastings on a murder charge. Tried and convicted, Billy breaks jail, with the aid of Fuzzy, in order to track down the real killer. Their only clue is the empty cartridge which Fuzzy found in the alley, which shows that the hammer of the gun that fired the bullet is defective.