"The proposed rule helps clarify that these blanket bans on transgender athletes are in violation of Title IX and is a really positive development."

"When it comes to the hard cases, this is saying that trans kids can be discriminated against."

Said Scott Skinner-Thompson, a University of Colorado lawprof, quoted in "Biden administration says schools may bar trans athletes from competitive teams/Proposed regulation would disallow blanket bans on trans athletes on the books in 20 states" (WaPo).

Under the proposal, schools would need to consider a range of factors before imposing a ban on trans athletes and would need to justify it based on educational grounds, such as the need for fairness. So, for instance, a school district could justify a ban on transgender athletes on their competitive high school track and field team, whereas a district would have a harder time making that case for an intramural middle school kickball squad....

So... just don't have a flat ban and schools can impose whatever limits they want if they say that's their assessment of "fairness"?

That sounds as though they are giving schools virtually complete discretion (at least beyond the little kids level) and the main effect is to preempt all the top-down bans from the state level. That would be using centralized national power to decentralize the decision-making to the local level.

But how much deference will there be to local judgment about "fairness"? 

Here's the text of the "fact sheet" about the proposed rule. The word "fairness" appears twice:

Under the proposed regulation, schools would not be permitted to adopt or apply a one-size-fits-all policy that categorically bans transgender students from participating on teams consistent with their gender identity.

Instead, the Department's approach would allow schools flexibility to develop team eligibility criteria that serve important educational objectives, such as ensuring fairness in competition or preventing sports-related injury. These criteria would have to account for the sport, level of competition, and grade or education level to which they apply. These criteria could not be premised on disapproval of transgender students or a desire to harm a particular student. The criteria also would have to minimize harms to students whose opportunity to participate on a male or female team consistent with their gender identity would be limited or denied....

Taking those considerations into account, the Department expects that, under its proposed regulation, elementary school students would generally be able to participate on school sports teams consistent with their gender identity and that it would be particularly difficult for a school to justify excluding students immediately following elementary school from participating consistent with their gender identity. For older students, especially at the high school and college level, the Department expects that sex-related criteria that limit participation of some transgender students may be permitted, in some cases, when they enable the school to achieve an important educational objective, such as fairness in competition, and meet the proposed regulation's other requirements.

Notice that both times the word "fairness" appears in the phrase "fairness in competition." That would seem to exclude ideas about privacy in the locker room or anything other than who wins or loses. Since "preventing sports-related injury" is mentioned separately, alongside "fairness in competition," it reinforces the interpretation that "fairness in competition" is just about the importance of preserving the ability of cis-females to win.

Notice, too, the stress on "educational objectives." I see some dissonance. What's the educational objective in ensuring that cis-females have a chance to win? If Title IX rests on some dogma about sports being an important part of education, what, exactly, is educational about winning, as opposed to just playing? Is it that fewer women will play if they worry that a particular type of other person might show up and radically reduce their chance of winning? Apparently the Biden administration sees — or is pretending to see — an educational objective in protecting women from becoming demoralized by the difficulty winning. 

Here's the text of the proposed rule, which does not mention "fairness":

If a recipient adopts or applies sex-related criteria that would limit or deny a student's eligibility to participate on a male or female team consistent with their gender identity, such criteria must, for each sport, level of competition, and grade or education level: (i) be substantially related to the achievement of an important educational objective, and (ii) minimize harms to students whose opportunity to participate on a male or female team consistent with their gender identity would be limited or denied.

It's all about "an important educational objective." What's the "important educational objective" in making cis-women feel capable of winning? I don't think this rule will effectively decentralize the decision-making to the school district level.