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The District of Columbia, which is now coterminous with the city of Washington, is a federal district, not a state.
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The DC part stands for District of Columbia, so it is a district separate from any state or city. This was to keep one state from having too much power. So, Washington D.C. is a self-governing district within the United States of America. The fact that the capital is not within a state is why people will say contests are 'open to residents of all fifty states and DC'.
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