In a large bowl, measure out the rice cereal and set aside.
In a microwave-safe bowl, combine the white chocolate chips, peanut butter, and unsalted butter. Microwave in 30-second intervals, stirring after each, until melted and smooth. Stir in the vanilla extract.
Pour the melted mixture over the rice cereal and gently stir until all the cereal is evenly coated.
In a large zip-top bag, add the powdered sugar. Pour the coated cereal into the bag, seal it, and shake until the cereal is well coated with the powdered sugar.
Spread the muddy buddies onto a baking sheet lined with parchment paper to cool.
In separate microwave-safe bowls, melt the red and blue candy melts in 30-second intervals, stirring until smooth.
Drizzle the melted red and blue candy over the cooled muddy buddies. Sprinkle with red, white, and blue sprinkles while the candy is still wet.
Allow the muddy buddies to set for about 30 minutes before serving.