If it's not having trouble swimming, then it is probably fine. Dwarf seahorses puff up their pouch to display to females and intimidate other males. It also might be pregnant, as they get knocked up pretty easily. :trampolin:
There isn't a good way to tell if it's pregnant or just displaying. Some will deflate shortly after displaying, others will keep it filled with water, proudly showing it's pouch for all to see. It can be slightly more dark looking as the pregnancy progresses, but it's really subtle and I wouldn't expect to be able to tell the difference until you've had them and observed them for a long time.