This study explores the relationship between gossip, decision-making and deterrence among active drug dealers. Drawing from interviews with, and observations of, 33 active drug dealers, we find that gossip shapes the ways in which these offenders respond to threatened sanctions. Gossip about others getting busted, acting sketchy and avoiding detection serves as vicarious experience with punishment and punishment avoidance and influences the behaviour of dealers accordingly. Dealers’ reactions, however, are contingent on their relationship with the subjects and sources of gossip. This study demonstrates that, at least for drug dealers, the deterrence calculus involves more than an internal weighing of costs and benefits; it is an interactional social process that is responsive to the informal communication permeating their day-to-day lives.