Correct spelling, explanation: according to most dictionaries, wholly is the correct spelling. It is an adjective whole with adverbial suffix -ly. E is dropped due to pronunciation reasons.
Wholely is incorrect, however some sources, for example Merriam-Webster dictionary point to wholely as an optional spelling for wholly.
Definition of wholly:
I didn’t understand the assignment wholly and I had to redo it.
These projects can be financed by the town: partially or wholly.
Incorrect spelling, explanation: despite of the fact that some sources show it as an option for wholly,
wholely is grammatically incorrect, as e is silent so l consonant doubles in speaking. Therefore we drop e when making the adverb wholly.
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