At the end of the day you have to set the threshold somewhere. One could argue that a 500-person event is still risky, but a balance has to be struck between attempting to slow the spread of the disease, and not unreasonably restricting people's activities.
In this case, what's reasonable is certainly up for debate. No measure will be perfect, unless we want to start advocating for no gatherings whatsoever (public or private) and effectively putting people under house arrest. While that would stop transmission of the disease, I think it's fairly uncontroversial to say that would be an overreaction. But certainly it's up for debate as to, say, whether a 100-person ban would be appropriate, vs. 1,000, 10,000, etc. They chose 1,000. It won't be a perfect number, but it will help.