What Is the Risk of a CEX Processing a Withdrawal Too Quickly on an Unconfirmed Deposit?

The risk of a CEX processing a withdrawal too quickly on an unconfirmed deposit is a direct exposure to a double-spend attack. If the deposit is not yet confirmed, an attacker can initiate a withdrawal of a different asset and simultaneously execute a double-spend on the original deposit.

The CEX would lose the withdrawn funds, as the original deposit transaction would be reversed on the blockchain. This is why CEXs enforce strict confirmation policies, even if it impacts user experience.