Without getting too technical on rest versus sleep, and the always vague term stress with fish.
Sand is where Macropharyngodon wrasses rest/seek refuge. They do not produce a mucus cocoon as other wrasses do to mask their scent/ bio signature from predators, and night is when the heavy hitting predators mostly come out in a reef. This is also he time when most healing/ bodily repairs and replenishments take place.
When you take this away you prevent these functions from occurring normally, and while this leopard may not be facing the normal rigors and stressors as a fish in the wild, it does take a toll.
Anecdotally, think of how a schooling fish reacts when kept on its own, its primary protection is gone, and while there are exceptions, will usually find a corner or hiding place and sulk and show stress coloring. A leopard wrasse is a degree more adaptable, but are still hardwired to look for refuge at night. If it wasnt important than leopard wrasses that are housed with sand would stay up later and later and eventually quit seeking the sand. This is not what happens, no matter how long you have a leopard wrasse they always go to the sand, and once acclimated to our light schedule always before it goes completely dark.
Therefore, when one is housed without sand it is kept an extra 8to 12 hrs of being on guard against danger, this long term will affect the longevity of a leopard wrasse. Lifespans in captivity are 5+ yrs. The local one you mention would be the exception if it made it that long in a barebottom tank.