I think intersex people are being used as a Trojan Horse here:
The department initially announced in June plans of adding a third gender marker for nonbinary, intersex, and gender-nonconforming people, but disclaimed that the process would take time, due to required, extensive updates to its computer systems.
A department official also added that the passport application and system update with the 'X' designation option still need to be approved by the Office of Management and Budget, which approves all government forms, before they can be issued.