Damned if you do, damned if you don't. Texas didn't want people to be able to self-identify their genders for the purposes of athletic competition. Thus, this person was not allowed to compete against boys.
The state forced the competition to be against girls. To me, this is example of the old saying "Be careful what you wish for." Sometimes there are unintended consequences.
I suppose the state could mandate that anyone on hormone therapy not be allowed to play any sports, but that would eliminate any female on contraceptives, people with thyroid problems, etc., etc. Again, unintended consequences.
What's the answer? I don't know. There are options.
1) They could allow people to compete with people of their "identified gender." Then, this person would have wrestled against the boys and it would've been harder to win.
2) They could say that if someone is taking male hormones, they need to compete against the boys and if they are taking female hormones, they need to compete against the girls. That might work.
I don't think there's any solution that involves saying something like "If you are transgender you cannot compete in any sport." I just don't think that would be a viable solution in today's society, even in Texas.