My "Best Friend is driving me crazy!?

I'm 16, gay, and only parents, brother, and best friend, Bob, know. My other best friend is matt. We're a trio. Bob is finally okay with me, coming from a very religious family, it took him a while to get used to the idea of me being gay. Matt always cracks gay jokes, and rude remarks. I tell him to stop, I get bob to talk to him as well. Bob is great becasue he tells me what people gossip about me. Matt, my "best friend" starts many of these roumers with his remarks and jokes! I've told him a million times that they're not funny, and he's being an a**, but he constantly makes these remarks! We've been friends for 11 years, so i dont want to give up, but how can i get him to shut up without coming out to him? He's phobic, and has stated that at school, he had to work with this gay guy, he'd tell him off and demand a new partner, because he "doesn't work with queers". I'm willing to do anything, including blackmailing him. I cannot afford to be outed now. My entire social circle would crumble. any ideas?