How does `find` replace `{}` if it contains special characters like `"`?

Recently when I read one QA , it has some unexpected behaviors for me:

~/findtest % echo three > file\ with\ \"double\ quotes\"
~ % find findtest -type f -exec sh -c 'set -x;cat "{}"' \;
+ cat 'findtest/file with double' quotes
cat: findtest/file with double: No such file or directory
cat: quotes: No such file or directory

IMHO when doine replacement, it will do 'cat findtest/file\ with\ \"double\ quotes\"' if just replacing the above filename file\ with\ \"double\ quotes\" which will work. If we keep the quote wrapper, it will show:

$ cat "findtest/file\ with\ \"double\ quotes\""
cat: 'findtest/file\ with\ "double\ quotes"': No such file or directory

Q: What does that replacement actually do causing the above a bit weird behavior with 2 substr 'findtest/file with double' and 'quotes' but not 'findtest/file with' and 'double quotes' with " as the delimeter?