UPDATE 12/14/21: One source (metallicaisrad) has clarified on Twitter that he did not mean to imply that Bully 2 would be announced at The Game Awards.
According to reputable insider Tom Henderson, Bully 2 is real and was potentially going to be revealed at The Game Awards 2021. Rockstar Games' mythical sequel to Bully has been something fans have been clamoring for since the mid-2000s, but due to other projects being prioritized and then the meteoric success of Grand Theft Auto 5 and Red Dead Redemption 2, many began to lose hope. Now, it seems that Bully 2 is happening and players will know more sooner rather than later.
Rumors stated that Bully 2 was canceled for GTA 6, another long-awaited title that Rockstar has been reportedly working on for years. Rockstar allegedly tried to make Bully 2 multiple times, but has never successfully reached far enough in development. There have been numerous rumors regarding the game possibly coming back over the years, but it seems like it may actually be happening now.
Insider Tom Henderson noted that Bully 2 was expected to be a potential reveal at The Game Awards 2021 and some people have seen a "playable version" that suggests an imminent reveal. To make things even more interesting, Game Informer's Blake Hester was also teasing something in relation to Bully 2 on Twitter on December 13. As of right now, all of this is just a rumor, so it should still be taken with a grain of salt, but it is one of the more promising signs that Bully 2 is happening.
Although Bully 2 has reportedly been canceled a number of times, it seems like it may finally happen. Rockstar has a lot of different teams, so it's likely this game is being worked on in tandem with Grand Theft Auto 6. Although Red Dead Redemption 2 was largely an all-hands-on-deck project, Rockstar recently acquired Ruffian Games and turned it into Rockstar Dundee. It's possible that this studio has splintered off to help make Bully 2 and lighten the gap between Red Dead Redemption 2 and GTA 6.
If Bully 2 is real, it sounds like it could be revealed within the next few months. The developer is known for avoiding large events like The Game Awards and E3, so it's possible it was considered for the reveal, but ultimately Rockstar decided it was better to have the spotlight reserved for itself. As of right now, Rockstar has yet to even tease Bully 2, but maybe there will be some news in 2022.