By Jonathan Stempel

NEW YORK (Reuters) - Stung by a court ruling ordering it to display a controversial ad from an anti-Muslim group on its buses, New York's Metropolitan Transportation Authority may adopt a policy that it said would allow the ban after all.

According to a letter submitted on Friday to U.S. District Judge John Koeltl in Manhattan, the authority's board plans on April 29 to vote on whether it should exclude "all advertisements of a political nature" from MTA property.

That would include the ad from the American Freedom Defense Initiative, which portrayed a man wearing a scarf around his face, with a quotation "Killing Jews is Worship that draws us close to Allah" attributed to "Hamas MTV," and below that, "That's His Jihad. What's yours?"

The group sued the MTA for rejecting the ad. On Tuesday, Koeltl said that rejection violated the group's First Amendment rights because the MTA did not show the ad could incite terrorism or imminent violence, including against Jews.

In Friday's letter, MTA lawyer Peter Sistrom said it was "beyond dispute" that the state-run authority could convert its property into a "limited public forum" that banned political ads, mooting the lawsuit.

He also said the proposed policy has been in the works for some time, and was not a "hasty reaction" to Koeltl's decision.

The MTA asked Koeltl to continue delaying enforcement of his preliminary injunction ordering it to run the ad, until the lawsuit could be dismissed.

"The notion that the MTA can moot a constitutional violation by changing its policy after the fact and wishing away the violation is absurd," said David Yerushalmi, a lawyer for the American Freedom Defense Initiative. He said the group's damages claim alone meant the case was not moot.

Lawyers said the proposed MTA policy might survive possible legal challenges, if it was not meant to target particular ads.

"Apart from streets, parks and sidewalks, the government as owners of space can restrict its speech uses as long as it does not engage in discrimination on the basis of point of view," said Frederick Schauer, a University of Virginia law professor.

Marci Hamilton, a professor at Benjamin N. Cardozo School of Law in New York, said: "Where the public transportation is open to all, there is a strong argument to designate a limited public forum to ensure a peaceful and efficient system aimed at getting the public to their destinations first and foremost."

(Editing by Ted Botha)