You can do this on splitscreen, system link, or over Xbox-Live. All you need to do is win an arena match. This is easy to boost with friends or by yourself on splitscreen. There is an arena in Fyrestone early on near one of the bandit camps. Only the host can start the arena once you have entered the lobby of the Arena. Nearby Arenas throughout the game will be marked by an "Arena" sign. The one in Fyrestone is near the starting area, and looks like a staircase that leads downward towards the entrance.