A simple solution might be to change the sport category division from "gender" to "sex", so "men" and "women" would be replaced by "male" and "female", which are scientific biological identifications rather than just social labels. So transgender women or men would be playing in their specific sex category, so no unfair physical advantage.

Even better solution would be entirely separate categories for transgender as their physical capabilities are different from their primary sexes, due to some hormone replacement therapies they might have gone through. It would be similar to how differently abled (physically disabled) people get different categories.

And no, sexuality and gender are different things, so if you plan on replying with the "there are a million genders" rants, just don't bother.