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Is Sand Okay?
Very much okay! A thin layer of live sand, preferably black, is the ideal substrate for a SHOWLR (Seahorse Only With Live Rock) tank, which is type of seahorse setup I prefer. It is bioactive, aesthetically pleasing, and is a fine-grained sand well suited for the various snails that form an essential part of the cleanup crew for a seahorse tank. I find the dark color shows off my seahorses and macroalgae to great effect and enhances the appearance of tank in general. (As long as it's fine enough I've never had any problems with seahorses "snicking" up sand in the aquarium. They will do so on occasion when feeding off the bottom, but never have any difficulty at all expelling it again as long as it's fine grained.)
The depth of a shallow sand bed like this is a crucial factor. Too deep, and you risk anaerobic dead spots where deadly hydrogen sulfide gas can form. Too shallow, and there will be less surface area to support beneficial nitrifying bacteria and Nassarius snails and other beneficial burrowers may feel vulnerable and exposed. A bed of live sand 3/4-inch to 1-inch deep is just right for the main tank. A properly layered Deep Live Sand Bed (DLSB) 3-6 inches deep with a full complement of sand shifters also works well with seahorses, but is best confined to a sump rather than the display tank due to the seahorse's heavy waste production.