Because the first bungee jumps were done on giant versions of the common bungee cords that people use for everything from keeping an overstuffed trunk lid down, to attaching luggage to a luggage rack. They are called Bungee cords. The first jumps were done on large versions of those cords... 5/8" to-3/4" to- 1" inch diameter. Made primarily for the military for heavy duty applications such as attaching heavy equipment such as tanks to parachutes for equipment drops. So since the cords they did these first jumps from were called "bungee cords" they named the new activity "bungee jumping"
Then about 8 yrs later after "bungee jumping" had caught on and had spread to the U.S. where the first commercial bungee jumping business had already taken off. Down under a New Zealander had decided to get in on the new craze and began trying to figure out a new system of cords to perform the same jumps. He found that you could buy the same latex rubber in bulk, that was the same as the rubber inside the "bungee" cords. It came in long continuous length ribbons. He found a way to wrap it around a spool on each end, round and round and then finally tying it off. The cord was then stretched out and bound with the same rubber in a dual helical binding to keep it from flying apart and the jumper getting caught up in the rubber during the rebound. These cords have different characteristics during the jump than the machine made "bungee" cords. Bungee cords are made with a machine called a braider. The rubber is stretched tight before going through the braider where the machine weaves a braided sheath around the stretched rubber.After the cord is finished the rubber inside stays stretched out tight so the jumps done on these can be made using a longer cord, resulting in a longer freefall. The cords designed in New Zealand are spongier and stretch longer, so a shorter cord has to be used. Since these cords are different from the usual bungee cords that had already existed he felt they should have a different spelling...hence the name and spelling...Bungy
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