Unwrap caramels and place them in a medium saucepan. Add sweetened condensed milk and butter. Heat over medium, stirring continuously until smooth, about 5-7 minutes.

Carefully dip each marshmallow into the warm caramel mixture, allowing excess to drip off. Ensure each marshmallow is well-coated.

In a large bowl, pour Rice Krispies cereal. Roll each caramel-coated marshmallow in the Rice Krispies until fully covered.

Line a cookie sheet with parchment paper. Place each coated marshmallow on the sheet and let cool for about 30 minutes.

Once set, store leftovers in an airtight container at room temperature.