Larimer County Sheriff Jim Alderden said that officers were preparing search warrants and drawing up charges against amateur scientist Richard Heene and unidentified members of his family.
Mr Alderden did not specify what charges were likely to be issued against Mr Heene, who underwent a day of further questioning by police on Saturday amid suspicions that the event could have been a hoax.
'We're in the process of drafting search warrants and we do anticipate at some point in the future there will be some criminal charges filed with regards to this incident,' said Mr Alderden.
'What those charges will be are most likely misdemeanors, which hardly seems serious enough given the circumstances.'
However, the sheriff also said he would be talking with the Federal Aviation Administration and other federal agencies about possible federal charges stemming from the incident.
Asked if it was a hoax, Mr Alderden replied: 'I think I've said enough here that you guys can read what's going on without me saying anything more formal.'
Police were initially convinced Mr Heene and his family were telling the truth about the circumstances of Thursday's drama, when Heene's six-year-old son, Falcon, was thought to have floated away in a home-made balloon.
The story dominated cable television broadcasts for several hours as millions tuned in to watch the drama unfold.
More than 80 law enforcement officers, news helicopters and search crews tracked the balloon before landing in a field near Denver International Airport.
The balloon was empty, prompting concerns the boy had fallen from it. Several hours later, Falcon came down from an attic space where he had been hiding as the search escalated, sparking joyous scenes.
Saturday's latest developments came at the end of another bizarre day which had begun with Mr Heene telling reporters camped outside his Fort Collins home to stand by for a 'big announcement'.
He finally emerged from his house carrying a cardboard box which he asked reporters to put written questions into for his consideration.
He brushed off shouted questions apart from one which asked him to confirm 'once and for all' if the balloon drama had been a hoax.
'Absolutely no hoax, I want your questions in a box and I'll get right back to you, okay?' Mr Heene said.
Skepticism about the saga was fuelled when Falcon Heene said during a CNN interview that he had not come out of his hiding place during the drama because 'you guys said that we did this for the show'.
However in an emphatic show of support for the Heene family on Friday, Mr Alderden said he was certain that officers had not been duped, citing the parents anguished state when Falcon was missing.
