Combine the chocolate chips, peanut butter, and the butter into a microwave safe bowl or measuring cup. Melt on medium setting, using 30 second intervals, stirring as you go.
Continue until the chips are almost melted then stir, to melt them completely. Don’t overheat or you can scorch the chocolate.
Place the cereal and the peanuts in a large bowl, tossing together to mix.
Pour the melted chocolate mix over the cereal and peanuts. Stir gently until the cereal and peanuts are completely coated.
Put 2 cups of the powdered sugar in a large, 2 gallon food storage bag. Spoon the cereal into the bag, close it tightly and shake until the cereal is covered with the powdered sugar. Add the extra powdered sugar as needed to completely coat the mix.
Spread the mix out onto rimmed baking sheets lined with parchment paper and let them air dry for about an hour to set up.
Keep in a sealed container.