Jai Dara Latto, from Walkerburn in Peeblesshire, was named Miss Transgender UK in a ceremony in London in September last year.
But now, Rachael Bailey, who runs the pageant, has removed Ms Latto’s title and is set to crown another beauty queen, Daisy Bell, the winner after seeing video footage she claims proves Ms Latto is not living as a woman full time.
Ms Latto, however, insists she is transgender and says she has already begun hormone treatment to become biologically female.
The video, which was taken as part of a documentary about the pageant to be screened online by BBC Three next month, reportedly shows Ms Latto relaxing at home wearing a pair of boxer shorts and working out at the gym in a T-shirt and shorts.
Ms Bailey said: “When Jai entered the competition, she said she was full time and she is not – she is a drag queen.
The documentary showed her living as a gay male in her boxer shorts. Underwear is very important to transgender females – one of the first thing people do is change their underwear as it makes us feel like we are finally a woman.”
She added: “When I confronted her, she just said that I didn’t have a leg to stand on and it is difficult. It is basically one transgender person saying to another ‘You’re not transgender enough to be in our competition’. It sounds daft when you put it like that.” The main prize for the competition, which sparked controversy when it was awarded last year, was to have £10,000 worth of surgery in India. But Ms Latto says she has returned the prize and is instead awaiting gender reassignment treatment in Scotland.
There was also a £5,000 cash prize for the winner, as well as a £3,000 modelling contract which has now been awarded to Ms Bell.
The 23-year-old beauty queen, who in April is to hike 30 miles in high heels to highlight the issues faced by those awaiting gender transition, said Ms Bailey had claimed she had broken terms and conditions by “not being ‘full time’”.
She said she had severed all ties with the pageant, which she claims forces transgender women into a female “stereotype” of long hair, tight clothes and lacy underwear. Ms Latto added: “I am transgender. It seems to me that Rachael has based [her claims] on her subjective opinion from having viewed the documentary Miss Transgender, which is yet to be aired.
“I gave consideration to sharing a letter from my doctor on my gender dysphoria [the feeling your psychological identity as male or female is opposite to your biological sex] but decided against it.
“The documentary clearly shows me living full time in my community functioning on a daily basis interacting with family, friends and others in my desired gender role.”
She added: “Being transgender is not some exclusive club. There are many of us in it and we are all different from one another.”