Begin by popping the popcorn. If using a microwave, pop ½ cup of unpopped kernels in a large microwave-safe bowl according to the package instructions. Once popped, set it aside in a large bowl.
In a medium saucepan, melt the butter over medium heat. Once melted, stir in the granulated sugar, powdered gelatin, salt, and vanilla extract. Mix well.
Bring the mixture to a boil while stirring constantly. Allow it to boil for 1-2 minutes until the sugar has fully dissolved and the mixture is bubbly.
If using food coloring, divide the syrup between two bowls. Add blue food coloring to one bowl and pink food coloring to the other, stirring until you achieve your desired shades.
Quickly pour the colored syrup over the popped popcorn. Use a mixing spoon to gently toss the popcorn so it is evenly coated with the syrup.
Spread the colored popcorn onto a baking sheet lined with parchment paper. Allow it to cool for about 5 minutes.
Once cooled, break the popcorn into pieces and top with cotton candy. You can either break the cotton candy into small pieces or leave it in fluffy clumps for decoration.
Serve immediately or store in an airtight container for up to 2 days.