The U.S. Education Department's Office for Civil Rights ruled that a Connecticut policy allowing biologically male, transgender athletes to compete in women's sports violates the civil rights of female athletes.
Several female track athletes filed a complaint last year, arguing that two biological male athletes had an unfair physical advantage during competitions.
The civil rights office said the policy, which allows transgender athletes to participate according to the gender with which they identify, is a violation of Title IX, the federal law that guarantees equal education regardless of gender.
"[The policy] denied female student-athletes athletic benefits and opportunities, including advancing to the finals in events, higher level competitions, awards, medals, recognition, and the possibility of greater visibility to colleges and other benefits," the civil rights office wrote in its 45-page letter.
The office said it may withhold federal funding if the policy is not amended.
"[The U.S. Education Department's Office for Civil Rights will] either initiate administrative proceedings to suspend, terminate, or refuse to grant or continue and defer financial assistance [to the Connecticut Interscholastic Athletic Conference]," the letter reads.