This is a very tough issue, and one that I continue to struggle with. I am supportive of people being whoever they want to be, and leaving people the fuck alone with their personal business. I am also very aware of mental health issues of trans/gay children and extremely sympathetic to their plight. I also have multiple daughters, one of which is a D1 athlete and a couple of others that want to be college athletes shortly. I understand the argument that we are dealing with very small numbers of female trans athletes right now, but I also know that these athletes are being actively recruited by my daughters coach and other coaches in their conference. I have been to her college events, and have seen several trans athletes in various competitions. They stand out with respect to their physical superiority. Those who have undergone male puberty have an undeniable physical advantage. That is just a fact. Male puberty gives you height, strength and speed and does not go away simply cause your testosterone levels are suppressed for a year or 2. People are willing to do a lot for a college spot at a prestigious university and to play college athletics. Coaches will do whatever it takes to win and to keep their jobs and get bigger, higher paying jobs. This means recruiting superior athletes. So while the numbers are low now, those numbers will grow, and cis females will be pushed out of college sports. We can not pretend that this won't happen.
Trans athletes need support, and a venue to compete athletically. Cis females also need to have a venue where they can compete on a level playing field. I agree that lawmakers probably should stay out of this, but this urgently needs to be addressed by the sports federations, which to this point they seem hesitant to do for the most part. Different classifications based on updated understanding of gender/sex/inherent physical development is probably a large part of the answer, but good luck achieving consensus on that.