Toast chiles in a small skillet over medium-low heat until dark and fragrant (1 – 2 minutes). Let cool, then remove and discard the stems. Coarsely chop toasted chiles de arbol, then transfer (seeds and all) to a spice grinder or mortar and pestle. Grind into a fine powder. Place chile powder in a small bowl with cinnamon and sugar, stirring to combine.

In a large bowl, whisk together flour, sugar, baking powder and sea salt. In a medium bowl, whisk together the milk and egg until combined. Whisk in the butter, then pour the wet ingredients in the bowl with the dry ingredients. Using a spatula, mix until combined. Don’t overwork the batter here. A few visible lumps are fine. Let the batter rest for 30 minutes.

Meanwhile, fill a large cast-iron pot halfway with oil (about 4 cups), and heat to 350°F. Also, spread the cinnamon-chile sugar out on a large plate and set aside. Working in batches, carefully drop heaping tablespoons of batter, five or six at a time, into the hot oil, and fry until golden brown (2 – 3 minutes). Using a slotted spoon, transfer donut holes to a paper towel-lined plate. Let cool for just a moment, and then roll the warm donut holes in the cinnamon-chile sugar. These donut holes are best enjoyed immediately, but will last for up to 1 day stored covered at room temperature.