The decision was taken to make things easier for transgender and nonbinary people to travel. As per the government's new policy, travellers will no longer have to provide medical certification to change their gender marker. Passport holders with no gender marker can now request a new passport while new applicants will get to choose their marker when applying.
The State Department menioned, "The process of adding a gender marker for non-binary, intersex, and gender non-conforming persons to these documents is complex and will take time."
Mary Emily O'Hara, a spokesperson for Gay & eLesbian Alliance Against Defamation (GLAAD) told the New York Times, "I'm honestly not sure whether I would be breaking the law" as most of the time they finds it very confusing to have a government issued-ID that doesn’t match their passport.
In view of this, the US State Department has also decided to take the step of specifying that the gender on a traveller's passport doesn't have to match on other documents.