Dave Marsh tells the story this way:
Trying to pull a fast one on their tiny record label, L.A.-based Arvee, the Olympics and producers Fred Smith and Cliff Goldsmith sold a single to Argo, an affiliate of Chicago’s Chess. Since the group was still under contract out West, it had to be called the Marathons, a name whose unsubtle connection to the Olympics is matched by the equally obvious musical relationship of “Peanut Butter” to the 1960 Olympics hit, “(Baby) Hully Gully.” So without much litigation, Arvee wound up with the record anyway, and the group landed right back where it started.
The Hully Gully, of course, was a real live line dance with an MC calling the moves. (See also the Madison.) Most such dances had a shortish shelf life, though the Hully Gully managed to survive until 1964, just in time for this attempt to cash in:
For that matter, you could probably eat peanut butter while wearing these.