In a large microwaveable bowl, melt chocolate chips, peanut butter, and butter in the microwave at 30 second intervals until completely smooth. Be sure to stir well between each interval.
In a large bowl place rice chex cereal.
Pour melted chocolate over cereal and stir carefully until all cereal is coated.
In a gallon size ziploc bag, pour 1 cup powdered sugar. Add coated cereal by the spoonful until bag is 3/4 full. Add in 1 more cup powdered sugar, and seal bag completely. Toss and shake bag around until cereal is coated in powdered sugar.
Pour coated cereal into a clean bowl, and then repeat above process with the remaining cereal.
Once all cereal is coated in powdered sugar, stir in M&M's.
Serve immediately, or store in an airtight container in the fridge.