Hi,
At Queens' University this summer we had this concern brought forward by one of our CoRec softball teams. We ended up adding a question to the account-creation page, that was:

"Queen’s Intramurals acknowledges that the Male/Female options presented above, do not encompass all individuals. The information is collected because many of our leagues are “Co-Rec”, requiring a certain number of males & females. We are examining different options, and appreciate your understanding in your registration. I identify as: "

We then presented several options. The individuals still had to select Male/Female, but could also select the gender they identify with. This satisfied the players concerns.