Ses Fontanelles wetland in Playa de Palma is more or less bone dry.
A larvicide kills only mosquito larvae; it doesn't affect other insects.
The Balearic High Court has rejected an appeal from the developer of the Palma Springs retail and leisure centre.
The town hall would not authorise the Palma Springs project at Ses Fontanelles.
The 225-million-euro mall was supposed to be up and running by the end of 2016.
The court decision potentially opens the way to the development of a controversial commercial centre.