In a large mixing bowl, measure out 9 cups of Chex cereal and set it aside.

Over medium heat, combine 1 cup of semi-sweet chocolate chips, 1/2 cup of smooth peanut butter, and 1/4 cup of butter in a medium saucepan. Stir continuously for about 3-5 minutes until everything is fully melted and well-blended.

Once your chocolate blend is melted, stir in 1 teaspoon of vanilla extract. Allow this mixture to cool for about 2-3 minutes before proceeding.

Pour the cooled chocolate mixture over the prepared Chex cereal in three separate portions. Gently fold each addition into the cereal.

In a large airtight plastic bag, combine 2 cups of powdered sugar and 1 cup of festive sanding sugar. Shake the bag well to combine the sugars evenly.

Add the chocolate-coated cereal to the sugar mixture in stages, carefully sealing the bag each time. Shake gently to coat the cereal with the sweet mixture.

Spread the coated cereal on a wax paper-lined baking sheet in a single layer. Let it chill in the refrigerator for about an hour to set properly.