You create, as a form of entertainment for the masses, an event for peak athletes to display their talent...by quirk of biology that means men.
You create a women's category to let them have their own entertainment niche.
You have in fact segregated sports, by gender, or sex, or whatever you want to call it.
Now there exist individuals who challenge the boundaries of this segregation. What do?
The realpolitik answer would be to segregate these individuals into yet another niche.
Of course the question arises, how many segregation categories to you create before it becomes all meaningless?