So, normally, when you run a contest, employees of the company running it aren't eligible. I assume employees of Stack Exchange, Inc. aren't eligible for the contest.
But what about moderators who aren't SE employees? Should the be eligible?
Your moderators are still community members just like you. They're taking on extra duties and volunteering their time to make the site a better place for everyone.
No other sites exclude community moderators from their contents and we here at Stack Exchange support that.
As a side note, if you ever see a moderator behave in a way that suggests they're abusing their privileges and the issue can't be resolved through the usual means (comments, chat, meta), drop us an email using the "Contact Us" link at the bottom of every page and we can review the situation.
I think they should be eligible. On a basic level, they are also regular users, that ask and answer questions. They are a part of the community. Just because they volunteered to do more, should not punish them in any way.
I admit that there is a conflict of interest. But, we have several moderators now. I think they are honest (or at least, that's what they made me believe ;) ) and they are under mutual control. Even if they were all cheating (in a broad meaning), some of the regular users would notice it and can report that.
Moderators are expected to (for example) close questions which aren't allowed on the site, retag questions that shouldn't be in the contest tags, etc. This of course also removes that question as an entry from the contest.
If the same moderator is also entering his/her own questions in the contest, removing other users' questions from the contest increases the moderator's chance of winning.
That is a conflict of interest. Therefor moderators should not be eligible for the contest.
(Of course, it'd be nice if StackExchange were to send them books anyway, as a thank-you for their work moderating.)