The success of the Internet of Things services (IoT-services) largely depends on the standards, but also on the regulatory rules that need to be set by policy makers (governments, regulators). Without the defined standards, interfaces and protocols, the true massive deployment of IoT will be difficult. In addition, the timely establishment of a balance between standards and rules on the one hand and the free development of IoT services and self-regulation on the other hand is a big challenge. If policy makers at the outset of development set too restrictive regulatory measures, they could jeopardize development of IoT service. At the same time, lack of regulatory measures does not give any legal certainty to companies, which can lead to a reduction in investment in IoT-based solutions. The content of the doctoral dissertation encompasses research in the Internet of things area that are inherent in smart cities, with an emphasis on electronic market regulation issues. The dissertation analyses the possible regulation of the Internet of Things (IoT) market and defines the taxonomy of IoT services for use in cities. The aim is to propose a method for defining regulatory requirements and analysing their impact on IoT services in the area of smart cities that would be acceptable to industry and at the same time stimulate further development of IoT services and on the other hand define clear rules that would also represent legal certainty for investors in this area. To make the proposed model, existing scientific/industrial models need to be adapted to regulatory rules that are clearly set for different areas of electronic communications, yet give enough freedom to create an incentive investment environment. The paper proposes the taxonomy of the Internet of Things service for different areas of application by bounding the technical characteristics of individual IoT services with regulatory features. With a cross-section of each role in the value chain a recommendation for easier implementation of IoT services is given. Finally, a business model is proposed that is suitable for smaller states, the size of the Republic of Croatia, where cities alone have insufficient resources to implement smart city projects.