In 1805 the business failed and as a result, Gully was imprisoned for debt. An informal match was arranged between them, which took place in the prison. As a result, Gully's debts were settled.
On 8 October 1805, Gully was again matched against Henry Pearce, before the Duke of Clarence (later William IV of the United Kingdom) and numerous other spectators. After fighting twenty eight rounds, which occupied an hour and seventeen minutes, he was beaten. In 1807, he twice fought Bob Gregson, the Lancashire giant, for two hundred guineas a side, winning on both occasions.
The foremost prizefighting reporter of the period, Pierce Egan, recorded their battle of 14 October 1807:
‘Gregson’s strength was manifest to his opponent, who endeavoured to ward off its potent effects by his thorough knowledge of the science, and Gulley put in another dreadful facer, which made the claret fly in all directions, when Gregson fell' (Boxiana, vol I)
Gully became the landlord of the Plough Tavern in Carey Street, London. He retired from the ring in 1808, and took to horse-racing. In 1827 he lost £40,000 by backing his horse Mameluke (for which he had paid four thousand guineas) for the St. Leger Stakes.
In 1862 he purchased the Wingate Grange estate and collieries. A street in Wingate, County Durham is named after him. Gully died at Durham on 9 March 1863 aged 79.
Gully was twice married and had twelve children by each wife. Their son was engineer and cricketer William Pedley. Gully makes a notable appearance in Royal Flash, in George MacDonald Fraser's The Flashman Papers series of books, and was played by Henry Cooper in the 1975 film version.
[11th United Kingdom Parliament. 12th United Kingdom Parliament]
Having bought Ackworth Park near Pontefract, he was Member of Parliament (MP) for the Pontefract constituency from December 1832 to July 1837.