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Reddish
Hello, at Sacramento State we have been exploring this situation as well.
We will allow the individual to play in whatever league they feel most comfortable. More organized leagues such as Sport Clubs and NCAA sports require proof of testosterone or hormone treatment and often specify a certain period of time that the person needs to be on the medication, but with Intramurals, we aren't that picky.
The main challenge becomes educating your participants on this matter. Educating them there are and will be trans-gender participants, as well as allowing the trans-gender participants to feel welcome and know there are options for them.