Ms Badenoch has asked the equalities watchdog to set out the benefits and disadvantages of amending current legislation to set people born female apart from someone who has legally transitioned.
This could result in the introduction of laws stopping trans women from using single-sex spaces or competing in female sports.
Ms Badenoch wrote to the Equality and Human Rights Commission (EHRC) asking it to consider the potential pros and cons of changing the definition of sex under the Equality Act, to set apart “biological sex”.
A transgender person who has been granted a gender recognition certificate is then legally recognised as belonging to the sex they identify as. But these proposed changes could limit that recognition.
In a letter to the EHRC in February, Ms Badenoch asked whether the definition of sex is “sufficiently clear and strikes the appropriate balance of interests between different protected characteristics”.
The EHRC responded to say it had considered the issue there was “no straightforward balance”.
But the body said it had “come to the view that if ‘sex’ is defined as biological sex for the purposes of EqA (Equality Act), this would bring greater legal clarity in eight areas”.
Examples of such policy or legal “areas” included female-only hospitals or spaces, maternity legislation, freedom to associate as gay or lesbian and sports.
The EHRC said a “biological definition of sex would make it simpler to make a women’s-only ward a space for biological women”.
On the subject of sport, the organisation said a biological definition of sex “would mean that organisers could exclude trans women from women’s sport without this additional burden” of having to show it was necessary to do so in the interests of fairness or safety.
But it said a change in the definition could be “more ambiguous or potentially disadvantageous” when it comes to issues like equal pay, direct or indirect sex discrimination.
In conclusion, it stated that the overall conversation on amending the definition warrants further discussion.
It stated: “On balance, we believe that redefining ‘sex’ in Equalities Act to mean biological sex would create rationalisations, simplifications, clarity and/or reductions in risk for maternity services, providers and users of other services, gay and lesbian associations, sports organisers and employers.
“It therefore merits further consideration.”