YES, this totally violates the modern color pie.
BUT if Blue is going to be the anti-horsemanship colour then it needs cards like this - just as Green has Plummet and Leaf Arrow (which this is shifted to blue & horsemanship). Besides, as the flavour text says, its not REAL damage, its all in their own heads.

Alternate flavor text was "Lets see you ride full tilt into a pit of sharpened stakes and see if the first thought through your head is Its not real, it's just an Illusion"

Yes, if blue is anti-horsemanship, this is obviously fine (they reprinted prodigal sorcerer in time spiral). Personally I'd prefer it if it were a more blue-feeling effect (even "exile"), but I don't think that's actually necessary.

And FWIW, an illusuory pit trap might well hurt them -- a horse falling over I don't think ends well for horse or rider...

I think he meant that the illusionary pit itself doesn't actually hurt them - its their reaction ie: falling over that does the damage.
You could have fun with this an reword it "Target creature with Horsemanship deals 3 damage to itself" you know, because it believed the illusion - hehe

Ooh, the damage-to-itself is a pleasing idea. More normally white (Repentance) or black (Kiku's Shadow), but the flavour works okay in blue.

I like the deals to itself.

Thanks guys, I actually like it this way rather than it dealing the damage directly like it originally did. Thanks for the input.