We all remember state-sponsored doping scandals from the 60s where iron curtain nations invested heavily on medical research and experiments on prospective athletes to try to get medals. It's not hard to understand how badly this would turn out to be if the same sort of unscrupulous regime could just abuse this loophole to seek the same benefit.
https://en.wikipedia.org/wiki/Doping_in_East_Germany
As far as I see, this issue is only tangentially related to transgender rights.