Line a large baking sheet with parchment paper and set aside. Measure the cereal into a very large bowl.
Combine white chocolate chips and butter in a microwave-safe bowl. Microwave at 50% power in 30-second intervals, stirring after each, until completely smooth and melted, about 2-3 minutes total.
Pour the melted white chocolate mixture over the cereal and gently fold with a rubber spatula until every piece is evenly coated.
Transfer the coated cereal to a large plastic zip-top bag. Add the powdered sugar, seal the bag, and shake vigorously for 1-2 minutes until all pieces are completely covered in white powder.
Spread the mixture onto the prepared baking sheet in a single layer. Let cool completely at room temperature for 15-20 minutes until the coating is dry and crisp.
Once cooled, gently toss in the red and blue M&Ms until evenly distributed. Transfer to a serving bowl or storage container.
