While we're periodically driven into a rumour-mill-frenzy of hope – most recently in August, courtesy of a GTA Online Bully Easter egg found in the GTA Online Casino update – it seems that Rockstar too wants a Bully sequel, and even worked on the successor for 18-months after Red Dead Redemption's release.
According to VGC, two "well-placed" sources have corroborated claims by YouTuber SWEGTA that a sequel had indeed been in production, with development progressing as far as a “very small slice” of playable gameplay, "complete with simplistic open-world gameplay".
While the sources seemingly wouldn't pin down specifics, its thought Rockstar New England was leading development for an estimated 18-month period somewhere between Red Dead Redemption’s release in 2010 and the end of 2013.
However. The momentum behind Bully 2 “fizzled out” and the development team was subsequently redeployed to other projects, including principal artist Drew Medina and Rockstar New York’s visualisation director, Steven Olds.
“It existed, it was playable, it was just a shame it never got off the ground,” the source reportedly said.
Sadly, neither source would be drawn on rumours that a sequel is in development now, but watch this space. In Red Dead Redemption 2, one of the game’s side quests rewards the player with the Calloway Revolver which has Canis Canem Edit engraved on the side (Bully’s official title in the UK), and the GTA Online Casino update added a painting into the game also titled Canis Canem Edit. With so many teasers, it's little wonder many think Bully 2 is actively in the works at Rockstar, perhaps slated to release on PS5 and Xbox Project Scarlett next year.
The first allusion to Bully 2 was in 2009 when Bully composer Shawn Lee said "it looks like I will be doing the soundtrack for Bully 2 in the not so distant future” (the page is now archived but you can check it out here thanks to the Wayback Machine).
Since then, in an interview Rockstar co-founder Dan Houser (quoted in an archived CVG article here) said the property is one that Rockstar adores and “might come back to in the future” following the development of Max Payne 3... and that was waaay back in 2012. It's clearly time to put us out of our misery, Rockstar.