Surely that bridge has already been crossed once one enters a competition to lose weight?
I don't see the issue with a water cut. These machines are inaccurate by up to 15%. Surely you want to do whatever you can to get it to 1% off than 15%? Your muscle mass doesn't change based on a water cut (I don't believe these things account for glycogen and water held in muscles?)
I, for one, hope this is all competitive instinct!!