Not sure if I should buy? Yes or no?

A guy I know at school is offering to sell his iPhone 4, but I think he stole it, so what are the dangers of buying a potentially stolen iPhone?

Nothing

It does not matter.

You try to use it and it gets blocked by the cell phone company, the police come and take it (and you) away.

Knowingly buying stolen property is a crime all by itself.

This phone could be blacklisted, meaning it's owner reported it lost or stolen. You will not be able to use such phone. CDMA iPhone (Sprint or Verizon) can't be activated under a new account unless previous owner removed it from his.
Check it's IMEI (MEID) number before buying (Settings>General>About). Call the carrier customer service and ask them to check phone's ESN for you.