I think perhaps none of this was a problem until self-Id became a thing?
It was at least contained. But allowing the official deceit in the first place was the thin end of the wedge - once you allow official falsehoods, the whole system inevitably dissolves in time, as you can't use reality to justify doing or not doing things.
If you're going to allow a deceit for some group, based on nothing real, you can't deny it to anyone else.
Some interesting stuff showing that in practice in these Reduxx pieces about California prisons.
ACLU Claims Denying Male Sex Offenders Transfer to Women’s Prisons is “Discriminatory”
“Trailblazing” Trans Inmate Slams Prison Self-ID, Wants Prisons to Apologize to Women
So the ACLU is arguing in the first piece:
"Similarly, CDCR cannot deny a transgender woman's transfer request based on her convictions or disciplinary history so long as it incarcerates cigender women with similar records in its women's prisons, as that would run afoul of the non-discrimination provision".
And they may well be right, given the state of the law there, unless you can argue it would contravene a higher human rights claim from the women inmates.
In the second article, someone points out a potential future legal attack in the other direction:
Norsworthy also noted that despite SB-132 being in effect, no transgender female-to-males have been sent to a men’s prison, and says that the official reluctance to move biological females who identify as men to the gender-specific institution exposes the ultimate intention of the law.
“They’re never going to allow a [female] to walk on a man’s yard because they know the men’s side is different,” Norsworthy says, “Those [female-to-males] are either going to have to start saying they’re women again in order to stay [in a women’s prison], or, if they are recognized as men — you gotta’ get them out of there! Because if you don’t, the male inmates are going to figure that out.”
Norsworthy warned that there will be no legal basis to keep any male inmate out of women’s facilities if trans-identified females are allowed to be legally recognized as men but avoid transfer to a male estate.
“That’s where the problem lies. The problem lies in the contradictions. And it is a very obvious game being played by these advocacy groups who got into California lawmaker’s ears and sold them a story.”
See - if "transgender men" can be held in the prison estate, then it would be discrimination to stop "cisgender men" - so men shouldn't even have to bother with the "self ID". With sex removed from the law, there's no remaining basis to prevent that. "Transgender men" and "cisgender men" have to be treated the same.
That claim probably won't be made by ACLU, as they're all about the trans, but someone could certainly bring it.