That’s just some TERF logic. They don’t want to be defined by biology until it suits them to exclude others. Biological variation within sex categories are just as broad—if not broader—than between them. Honestly, many sports should be divided by weight class rather than sex.
But with the current state of things, I think trans people should compete with their gender—especially in schools. A ton of the vitriol is directed at like preteens and teenagers who just want to compete with their friends. When it comes to Olympic sports I’ll defer to people with more information, although I am forever in Caster Semenya’s corner. The way she was treated (as a cis woman with a hormone imbalance!) was horrific.