So the two players screens both show up, but you can't control player 2 with a controller? 2/3/4 players requires a plugged in controller and it's recommended that you use an xbox 360/one controller.
Does the controller work in other games, because if not you need to install a driver: http://www.cultofmac.com/198535/use-your-xbox-360-...
If the controller does work with other games can you try unplugging it, restarting your Mac, starting Planet Deathmatch, and then plugging it back in.