Melt butter in large saucepan set over low heat; stir in marshmallows for 2 to 3 minutes or until completely melted. Stir in vanilla. Remove from heat.
Immediately stir in cereal until combined. Scrape into bowl and let cool slightly.
Scoop cereal into 2 tbsp (30 mL) portions. Using wet or lightly buttered hands, roll into balls. Transfer to parchment paper–lined tray; let cool completely.
Using two forks, dip cereal balls into melted chocolate, letting excess chocolate drip back into bowl. Return to parchment paper–lined tray. Let stand for 30 to 60 minutes or until chocolate is set and hardened.
Drizzle with red and green icing; garnish with holiday sprinkles.
Substitute finely chopped white chocolate or white chocolate candy melts for white chocolate chips if preferred.
To melt white chocolate, place chocolate chips in heatproof bowl set over saucepan of barely simmering water for about 5 minutes or until chocolate can be stirred. Or, in microwavable bowl, microwave chocolate chips on Medium power, stirring every 30 seconds, for 1 to 2 minutes or until smooth and melted.