The cycling event you describe is clearly unfair and ought not be permitted. Establishing a new category seems intended to deal with matters fairly. Whether making it open needs some thought and possible restrictions on male riders above specific levels of achievement.
One of my grandchildren, biologically female, now identifies as male. They attend an elite sports college that specialises in ladies rugby and are playing for them, and at County level and have bulked up considerably in the last year because of the diet they follow. They are completely accepted within the group, at least one of whom is going through the same experience they are.
Whilst physically capable of playing men’s rugby can you imagine it being safe for them to do so?