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Background
This quest is related to fistfights organized in the tavern's lower floor. Fistfighting is a mini-game just like from the first game, but redesigned into quick-time events (QTEs).
Walkthrough
First fistfighting quest,
One on One: Flotsam, is initiated in tavern's lower level (
#1). Simply approach the fighters and a man named Sheridan, who will ask you whether you want to compete in the local tournament. Agreeing will set you up against your first opponent, Stycho the Sot. You can bet up to 10 orens, and you should, because fisfights are simple QTEs and pretty easy money. After defeating your first opponent, you'll be fighting Kcorb "Fliparse" Ransel. You can bet 15 orens and if you win, you'll get noticed by a local fist fighting manager "King" Ziggy.
Ziggy will tell you that he recognized the talent in you and he can set up some higher level fights, all you need to do is accept the offer. This starts the quest Fight Club. Before going off with King Ziggy, be sure to finish off
One on One: Flotsam, as you're on the last phase (2/3 contestants beat). Talk to Sheridan and he'll set you up a fight against Tidy Tib and a bet of 25 orens. Defeat this fighter and you'll finish the quest. No experience here though, just the coin you earned through betting.
1 - Tavern, lower level, Sheridan