So how about a third class/sex? We have male competitions, female competitions, why can't we have transgender competitions? Seems to me to be the simplest, fairest solution, given that hormone treatments might give a person an unfair advantage that we're trying to keep out of male and female sports, but that are inherently impossible to avoid in transgender sports.
I'd guess that people who aren't clearly male/female would probably tend to be grouped in the more competitive category.
For example, say that an intersexed-athlete (not simply male nor female) plays two sports: one where males are seen as advantaged and another where females are seen as advantaged. Then, the intersexed-athlete would probably compete in the male-category in the male-advantaged sport while simultaneously being in the female-category in the female-advantaged sport.