It's both:

What democrats are trying to pull is a sneaky trick, to add a 51st state without making "all" of DC a state.

The District of Columbia is a creation of the Constitution, which limits what Congress can do to change its status without a constitutional amendment. Article I, Section 8, Clause 17 of the Constitution establishes that Congress has “exclusive” legislative power over “such District (not exceeding ten miles square) as may, by cession of particular states, and the acceptance of Congress, become the seat of the government of the United States.”

Because the Constitution is so clear on this point, a constitutional amendment would be required to actually make the District of Columbia, as currently established, a state. Given the implausibility of a constitutional amendment on this point, Democrats in Congress have a different plan for D.C. statehood. [Here comes the trick]

The plan would not technically give D.C. statehood. Rather, it would create a new state, to be named Washington, Douglass Commonwealth [I swear I am not making this up], out of a land grant from the federal government consisting of most of the current District of Columbia. Congress would shrink the federal District of Columbia to encompass only a few federal government buildings, such as the Capitol, the White House, and the Supreme Court.

emphasis mine

https://www.rpc.senate.gov/policy-papers/practical-and-legal-problems-with-dc-statehood