Line a baking sheet with foil or an 8 x 8 casserole dish. Spray with nonstick spray.
Place the candy canes in a plastic bag and crush with a rolling pin.
In a medium size pan over LOW heat melt the white chocolate chips with the sweetened condensed milk until almost melted, a few little chips remain. Stir frequently. Remove from heat and stir and the rest of the chips will melt.
Stir in peppermint extract and 1 cup of the chopped candy canes.
Immediately pour into prepared dish.
Sprinkle the remaining ½ cup of chopped candy canes on top of the fudge and gently press slightly into the fudge.